IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA Arbitration Appeal No. 12 of 2007 Date of decision: November 26, 2008. Ram Pal Sharma …appellant Versus. Som Nath Sharma …respondent. Coram: The Hon’ble Mr. Justice Deepak Gupta, Judge. The Hon’ble Mr. Justice V.K.Ahuja, Judge. Whether approved for Reporting? yes For the Appellant (s): Mr. Baldev Singh, Advocate vice Mr. Anil Chauhan, Advocate. For the Respondent(s): Mr. Sanjeev Bhushan, Advocate. Deepak Gupta, J (Oral). This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 ( hereinafter referred to as the Act) is directed against the order of the learned District Judge, Una passed in Objection Petition No. 2 of 2002/ RBT 5 of 2003, decided on 23.5.2007, whereby he has rejected the objections filed by the present appellant under Section 34 of the Act. An interesting question arises in the present case. The appellant as well as the respondent were partners of a - 2 - firm M/s Cosmo Paints Industries. Disputes arose between them. By consent of the parties, the disputes were referred to the Arbitral Tribunal which was given the nomenclature of Arbitration Committee. This Arbitration Committee consisted of 6 arbitrators. This committee gave its award on 23.1.2001. Objections against the said award were filed by the present respondent in the Court of the Senior Sub Judge, Una who in turn assigned the same to the Sub Judge Ist Class Court No.II, Una. Before the Sub Judge, both the parties agreed that the award by the Arbitral tribunal be set aside. They also agreed that the disputes be again referred to adjudication by a new arbitral tribunal consisting of two members, namely, M/s S.N.Bali and Gurbax Singh, Advocates. One Advocate Shri S.N.Dharmani, was appointed as Umpire. This arbitral tribunal then passed the award in favour of the respondent and against the appellant. The appellant challenged this award on various grounds but the main ground of challenge was that neither the Senior Sub Judge nor the Sub Judge (II) had any jurisdiction to entertain or hear the claim/objections against the earlier award. - 3 - In support of this submission, reliance has been placed on the judgment of a Division Bench of this Court rendered in Surat Singh v. State of H.P. & anr., Latest HLJ 2003 (HP) (DB) 691, In this judgment the division bench held as follows:- “7. A comparative look at the two provisions, one occurring in 1996 Act and the other in the Arbitration Act, 1940 in so far as the definition of the term “Court” is concerned, would manifestly and very clearly demonstrate that whereas in the Arbitration Act, 1940 the “Court” was defined to mean any Civil Court having jurisdiction to decide the questions forming the subject matter of the reference as if the same had been the sub-matter of a suit, under 1996 Act the meaning of the expression “Court was narrowed down and confined to be principal Civil Court of original jurisdiction in a district. As noticed earlier, under Section 9 of the H.P. Courts Act, 1976, the “Court” of a District Judge alone is a principal Civil Court of original jurisdiction in a district. This is in sharp contrast to the definition as was occurring in the Arbitration Act, 1940 wherein any Civil Court with reference to its pecuniary and territorial limits, would have the jurisdiction to entertain any matter arising out of or relating to any issue covered by 1940 Act as of it was the subject matter of a civil suit. In elaboration of this point, we may refer to Section 15, CPC occurring in Part-1 of the Code of Civil Procedure relating to the subject matter of the jurisdiction of the “Court” whereby it has been clearly stipulated that every suit shall be instituted in the “Court” of the lowest grade competent to try it. Not only Section 15, even subsequent Sections in Part-1 of the Code of Civil Procedure, such as Sections 16 to 20, being closely inter-linked with each other would have the direct bearing to the substance and applicability of Section 2( c) of - 4 - Arbitration act, 1940 to clearly spell out the Legislative intent behind Section 2 (c ) of that Act so as to convey that any Civil Court having territorial jurisdiction as well as having pecuniary jurisdiction would be competent to decide any question forming a subject matter of the reference arising under the aforesaid Act as if such subject matter related to a suit. In clear departure from the aforesaid definition, under the 1996 Act the Legislature clearly circumscribed and specifically narrowed down the definition of the “Court” only to mean the “Court of principal Civil original jurisdiction in a district”, and it is only a court of District Judge in a district which is such a “Court” of principal Civil original jurisdiction (in this case, we are not concerned with the inclusive definition as occurring in Section 2(e) of 1996 Act relating to the jurisdiction of the High Court also being a Court of ordinary original civil jurisdiction. 8. On the basis of the aforesaid discussion, therefore, what clearly emerges is that irrespective of the valuation of the subject matter of a reference or any application filed under Part-1 of 1996 Act, including an Application filed under Section 34 of the Act, no court other than the court of a District Judge would have the jurisdiction to decide such a reference or such an application. In other words, therefore, the court of Senior Sub Judge, would not have the jurisdiction to decide such a reference or such an application.” There is no manner of doubt that the principal Civil Court was the District Judge and hence the Senior Sub Judge had no jurisdiction to entertain the earlier objections. Assignment of the objections to the Sub Judge would also not confer any jurisdiction on the Sub Judge. - 5 - Mr. Baldev Singh learned counsel for the objector urged that since the Court of the Senior Sub Judge/Sub Judge lacked inherent jurisdiction to hear the matter, the parties even by consent could not have conferred jurisdiction upon him and, therefore, any order passed by the Senior Sub Judge is void and not binding on the parties. He further contends that the constitution of the second arbitral tribunal was totally illegal and the award passed by it is not binding on the parties. There can be no quarrel with the preposition that the parties even by consent cannot confer jurisdiction on court which does not have the consent to hear the matter. Therefore, at first blush, the contention of the learned counsel for the objector appears to be very attractive. However, on a deeper analysis of the provisions of the Arbitration & Conciliation Act, we find that we are unable to agree with the contention put forth by the learned counsel that the second arbitral tribunal was not properly constituted. Section 15 of the Act, deals with the termination of the mandate and substitution of the arbitrator. It reads as follows:- - 6 - “15. Termination of mandate and substitution of arbitrator ----- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate – (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. (3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal. (4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.” A bare perusal of the provisions of this section shows that mandate of the arbitrator can be terminated pursuant to the agreement between the parties. Sub- section (2) of section 15 provides that where the mandate of an arbitrator is terminated, a substitute arbitrator should be appointed according to the rules applicable to the appointment of the arbitrator being replaced. In the present case, the undisputed facts are that the parties agreed before the Sub Judge that the award - 7 - of the arbitral tribunal be set aside. It is not disputed that parties agreed before the Sub Judge that the arbitral award dated 7.6.2002 passed by the earlier arbitral tribunal be set aside. This clearly amounts to terminating the mandate of the arbitrator. This order was passed by consent of the parties. In case the order had not been passed by consent of the parties, obviously the order would have been totally without jurisdiction. Even the consent would not confer jurisdiction but the statements made by the parties before the Sub Judge amount to an agreement in terms of section 15 whereby they agreed to the mandate of the arbitrator being terminated and also agreed to appoint the substitute named arbitrators as detailed hereinabove. Even though, the Sub Judge had no jurisdiction to pass an order in the matter, de hors that order, there is an agreement between the parties that the mandate of the earlier arbitral tribunal be terminated and substitute arbitrators be appointed. It would also be pertinent to mention that after this order was passed in terms of the agreement entered into between the parties, the objector appeared before the second arbitral tribunal. He acquiesced in the proceeding - 8 - and did not challenge the jurisdiction of the arbitral tribunal. True it is that acquiescence by itself would not confer jurisdiction on the arbitral tribunal, in case the arbitral tribunal had been constituted by an order of the court having no jurisdiction. But, as we have held above, the second arbitral tribunal was not actually constituted by the Court but was constituted by agreement of the parties. This was in terms of arbitration agreement and in terms of sections 15 & 16 of the Act. Therefore, we reject this contention of the objector. On merits the learned District Judge has already dealt with the matter and we find no error in the award of the arbitral tribunal which would render the award against public policy. Consequently, we uphold the order passed by the learned District Judge and dismissed the appeal. No costs. ( Deepak Gupta ), J. November 26, 2008. ( V.K.Ahuja ), J. s.