- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. ARBITRATION PETITION NO.212 OF 2005 ... Hede Navigation Limited ...Petitioners v/s. Deepak Fertilizers and Petrochemicals Corporation Limited ...Respondents ... Mr.V.K.Rambhadran for the Petitioners. Mr.M.P.S.Rao i/b M/s.J. Sagar Associates for the Respondents. ... CORAM: D.K.DESHMUKH, J. DATED: 11TH OCTOBER,2005 - 2 - P.C.: 1. This petition is filed under Section 8 of the Arbitration Act, 1940. The facts relevant for deciding this petition are that, admittedly there is an agreement between the parties which contains an arbitration clause. Arbitration clause reads as under:- M32.Arbitration Clause: Any dispute arising under this Charter shall be settled in accordance with the provisions of the Indian Arbitration Act, 1940 in India, each party appointing an Arbitrator and the two Arbitrators, in the event of disagreement appointing an Umpire whose decision shall be final and binding upon both parties hereto. The Arbitrators shall be commercial men. - 3 - 2. The disputes arose between the parties and an arbitration award was made. It appears that the award was made by the sole arbitrator who was appointed by the Petitioner. The Respondent challenged that award by filing arbitration petition before this court, which was registered as Arbitration Petition No.105 of 1993. That petition was disposed of by this court by judgment dated 1st August, 1996. It is paragraph 20 and paragraph 21 of that judgment, which are relevant. They read as under:- 20. In view of the above discussion, so far as this petition is concerned, the same is allowed. The award dated September 25, 1991 is set aside and the matter is remanded back to the arbitrator for determination and adjudication of the issues between the parties afresh. 21. Petitioners and 1st Respondents to appoint their respective arbitrator within a period of six weeks from today. Arbitrators so appointed by the parties to give their award within a period of four - 4 - months of their entering upon the reference determining and adjudicating the issues between the parties afresh. 3. It is clear that the court set aside the award made by the sole arbitrator, directed the parties to appoint their respective arbitrators in terms of the arbitration clause within a period of six weeks from 1st August, 1996, and directed the arbitrators to be appointed by the parties to give their award within a period of four months from the date of entering upon the reference. Pursuant to this order, the Petitioner made appointment of his arbitrator on 9-12-1996. This appointment by the Petitioner of the arbitrator admittedly was not within six weeks as directed by the Court. The Respondent appointed his nominee on the arbitral tribunal on 10-2-1997. Thus, it can be said that by 10-2-1997 the arbitral tribunal got constituted though not within the time limit fixed by this Court. Admittedly, the arbitral tribunal did not meet and did not transact any business. The Petitioner being the claimant on finding that the arbitral tribunal is not taking steps to decide the reference and make an award, had - 5 - an option of moving an application before this Court under Section 11 for removal of the arbitrator. The Petitioner did not do so. I do not find any valid reason given for not doing so. Ultimately, the arbitrator appointed by the Respondent expired on 23-12-2002. On 15-1-2003 the Petitioner issued a notice to the Respondent to fill in the vacancy on the arbitral tribunal by making appointment of his nominee within a period of 15 days from the date of service of the notice. Admittedly, though the notice was duly served on the Respondent, the Respondent did not make appointment of the arbitrator within the time mentioned in the notice still the Petitioner did not move this Court for appropriate orders immediately. Ultimately, the Petitioner filed the present petition on 22-6-2005. According to the Petitioner, the Petitioner has moved the present application within a period of three years, which will be the period of limitation applicable to the application under Section 8, in view of the provisions of Article 137 (First Schedule) of the Limitation Act. In the submission of the learned Counsel, therefore, this court should make an order under Section 8 and appoint an arbitrator on the arbitral tribunal. - 6 - 4. Petition is opposed by the Respondent. According to the Respondent, an order under Section 8 is in the discretion of the court and the court should not exercise its discretion under Section 8 in favour of the Petitioner who is guilty of latches. According to the Respondent, though the alleged cause of action of the Petitioner against the Respondent has arisen in the year 1987, the award made by the sole arbitrator appointed by the Petitioner was set aside by this court on 1-8-1996. Since, then nothing has happened in the matter till June, 2005 when the present petition was filed. The learned Counsel for the Respondent submits that perusal of provisions of Section 19 of the Arbitration Act shows that when an award is set aside, the court has to consider whether to make an order superseding the reference. In terms of Section 19, consequence of the order superseding the reference is that the arbitration agreement ceases to have effect. The learned Counsel submits that as this court has set aside the award by its judgment dated 1-8-1996, considering the conduct of the Petitioner of not taking prompt steps to have the arbitral tribunal constituted the Petitioner has - 7 - lost his rights to have the dispute determined by an arbitral tribunal, and therefore, according to the Respondent this court should exercise its power under Section 19 and supersede the reference. 5. Now, in the light of these rival submissions, if the record of the case is perused, it becomes clear that even according to the Petitioner his cause of action for recovery of certain amounts from the Respondent has accrued to him in the year 1987. The award was made in his favour, which came to be set aside by this Court on 1st August, 1996. The court directed the parties to make appointment of the arbitrators within six weeks. Therefore, it was expected that the Petitioner being the claimant he will appointment of his nominee on the arbitral tribunal within six weeks from 1st August, 1996 as directed by the Court, but he did not make the appointment within that time. In any case, he appointed his nominee on the arbitral tribunal on 9-12-1996. The Respondent appointed his nominee on 10-12-1997. Admittedly, the arbitral tribunal did nothing to enter upon the reference. Had the Petitioner been diligent about his right and had he - 8 - been confident about his claim, the Petitioner would have immediately moved this court under Section 11 for appropriate orders for removal of the arbitrator and for appointment of the new arbitrator. The Petitioner did not take that steps and I do not find any valid reason disclosed by the Petitioner for not doing so. Ultimately, the nominee of the Respondent died in December, 2002. In view of the provisions of Section 8, the Petitioner was entitled to move this court immediately on failure of the Respondent to fill in the vacancy within 15 days of receipt of notice, but the Petitioner did not move this court immediately after notice dated 15-1-2003 was served by him on the Respondent and the Respondent did not fill in the vacancy. The Petitioner waited for more than two years to move this application. It is clear from the provisions of Section 8 that it vests power in the court and therefore, obviously, the court has to exercise that power for advancing justice. In my opinion, the power of the court is to be exercised always in favour of a litigant who has been diligently prosecuting his remedy and not a litigant who is sleeping over his rights for years. In my opinion, even assuming that provisions of Article 137 of the Limitation Act apply and the - 9 - application filed by the Petitioner is within three years then also, in my opinion, in view of the latches the Petitioner is not entitled to have the arbitral tribunal constituted. 6. Perusal of the provisions of Section 19 shows that the court has been given power to supersede a reference after setting aside the award. The power of the court to supersede the reference is to be exercised by the court where the court finds that keeping reference alive may result in injustice. For example where the court finds that if the reference is kept alive, stale and outdated claims are likely to be agitated, the court, in my opinion, should exercise its power and discretion in favour of advancing justice. When the claims are commercial in nature, they are mostly based on documents. With passage of time documents become unavailable, the witnesses become untraceable and therefore, keeping stale claim alive may result in miscarriage of justice. In such a situation, in my opinion, the court will be advancing justice by putting an end to such a litigation, specially when the court finds that the litigant has been guilty of latches and has not been diligent in prosecuting the - 10 - litigation. 7. For all these reasons, therefore, in my opinion, the Petitioner is not entitled to have the arbitral tribunal reconstituted. It will be in the interest of justice that the litigation is to put to an end because the claim of the Petitioner has become stale due to passage of time. 8. In the result, therefore, the petition fails and is dismissed. The Petitioner is directed to pay costs of this petition to the Respondent as incurred by the Respondent. ....