1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.356 OF 2005 Ion Exchange (India) Ltd. a Company registered under the Companies Act,1956 having its registered office at Tiecicon House, Dr.E.Moses Road, Mahalaxmi, Mumbai-400011. ...Petitioner vs. Paramount Limited. Paramount Complex, Gotri Road, Race Course, Baroda-390007. ...Respondent --- Dr.V.V.Tulzapurkar with K.D.Parikh, V.Y.Divekar i/b. Divekar & Co., for Petitioner. Mr.Pradip Sancheti with Sanjay Jain i/b. Vinod Mistry & Co., for Respondent. CORAM: D.K.DESHMUKH,J. DATED: 5th June, 2006. ORAL JUDGMENT 1. By this petition, the petitioner challenges the Award made by the Arbitrator directing the petitioner to pay certain amounts to the respondent. An objection to the maintainability of the petition before this Court is raised by the respondent. The 2 objection raised by the respondent is that after the Award was made on 5.5.2005, an application under Section 9 of the Arbitration & Conciliation Act was filed by the respondent in a Court at Baroda and therefore, in view of the provisions of Section 42 of the Arbitration and Conciliation Act,1996, this petition will not be maintainable before this Court. It is submitted that Section 42 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) lays down that with respect to the arbitration agreement if any application under part- I of the Act has been made in the Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the Arbitral proceedings shall be made in that Court. It is submitted that an application made under Section 9 of the Act is an application made with respect to the arbitration agreement pursuant to which the Award which is challenged in the petition has been made under part I of the Act, and therefore, it is only the Court at Baroda which will have jurisdiction to entertain the application filed under Section 34 of the Act, 3 subsequent to the filing of application under Section 9 of the Act. The present petition was filed by the petitioner in this Court on 29.6.2005 and therefore, the present petition is the subsequent application and therefore, this Court will not have jurisdiction to entertain this application. It is further submitted that the petition is not maintainable in the Court because for the purpose of this petition this Court is not the Court within the meaning of the Act. It is submitted that in view of the definition of the term “Court” found in the Act a petition under Section 34 of the Act can be filed only before the Court which could have had the jurisdiction to entertain a suit on the same subject matter had a suit been filed instead of taking out arbitral proceedings. In the present case no part of cause of action in relation to the subject matter of the dispute between the parties has arisen within the jurisdiction of this Court. Therefore, had the petitioner filed Civil suit instead of taking out arbitral proceedings, the suit could not have been entertained by this Court. 4 2. In reply, it is submitted on behalf of the petitioner that the provisions of Section 42 of the Act will not operate to oust the jurisdiction of this Court to entertain this petition because of the filing of the application under Section 9 of the Act by the respondent before the Baroda Court, firstly because the application made under Section 9 of the Act before the Baroda Court by the respondent was not a bonafide application and the application contemplated by Section 42 of the Act is a bonafide application. It is submitted that as a result of the decision of the Division Bench of this Court in the case of "HMP Engineers Ltd. & others Vs. Ralies India Ltd. and others, 2003(4) Mh.L.J. 931” the provisions of Section 4 to 24 of the Limitation Act do not have application to an application under section 34 of the Act. Therefore, if an application is not filed within the period of limitation provided by section 34 of the Act, the remedy of filing an application under Section 34 of the Act challenging the Award is permanently denied to the person who feels aggrieved by the Award. In the submission of the petitioner, therefore, an application to be 5 termed as bonafide application for the purpose of Section 42 of the Act would be an application of which the petitioner has received notice before the expiry of the period of limitation fixed by Section 34 of the Act. It is submitted that in the present case, the Award was made on 31.3.2005. It was communicated on 6.4.2005. An application under Section 9 of the Act was filed by the respondent before the Baroda Court on 5.5.2005. The last date of limitation according to Section 34 of the Act for filing petition under Section 34 of the Act was 7.7.2005. But according to the petitioner, the notice of having filed petition under section 9 before the Baroda Court was served on the petitioner on 20.7.2005. Though, according to the respondent, the date of service of notice is not 20.7.2005 but 14.7.2005, but it is an admitted position that the service of notice about the filing of application under section 9 of the Act by the respondent before the Baroda Court was served on the petitioner after expiry of period of limitation fixed by Section 34 of the Act. According to the petitioner, in view of the fact that the provisions of Section 4 to 24 of the 6 Limitation Act are not applicable to the petition filed under Section 34 of the Act, Section 42 of the Act may be so read as to oblige the respondent to intimate the petitioner about the filing of application under Section 9 of the Act after the Award is made, immediately on filing the application so that the petitioner can arrange his business accordingly and can file his petition before that Court where application under Section 9 of the Act has been filed or take an informed decision about the Court in which he wants to file petition under Section 34 of the Act. It is submitted that otherwise the petitioner would be rendered remedyless for no fault of his because if this Court does not have jurisdiction because of filing of application under Section 9 of the Act before the Baroda Court then the petitioner cannot go to the Baroda Court because the period of limitation is over and the provisions of the Limitation Act relating to exclusion of time are not applicable. It is further submitted that the application made by the respondent before the Baroda Court is not a previous application contemplated by section 42 of the Act. Even before 7 the Award was made, the petitioner had moved an application under Section 11 of the Act before this court in relation to the constitution of Arbitral Tribunal. Relying on a judgment of the Constitution Bench of the Supreme Court in the case of “M/s.S.B.P. & Co. Vs. M/s.Patel Engineering Ltd. and anr. 2005(9) Scale 1” it is submitted that the Chief Justice before whom the application under Section 11 of the Act is made is a Court for the purpose of Section 42 of the Act and therefore, as the application under Section 11 of the Act was filed before the Chief Justice of this Court, it is this Court which will have jurisdiction to entertain the petition filed under Section 34 of the Act. It is further submitted on behalf of the petitioner that the application filed by the respondent under Section 9 of the Act at Baroda cannot be taken as the previous application for the purpose of Section 42 of the Act because the application filed under Section 9 of the Act by the respondent was an application filed after the Award was made and therefore, it cannot be termed as an application made with respect to the arbitration agreement. Relying on the judgment of the Supreme 8 Court in the case of “Kamal Pushpa Enterprises Vs. D.R.Construction Company, AIR 2000 Supreme Court 2676” it is submitted that an application made for enforcement of the Award is an application made not for enforcement of the Contract but it is for enforcement of the Award and therefore, the application made by the respondent under Section 9 of the Act before the Baroda Court seeking direction from the Court to the petitioner to deposit the amount in relation to which the Award is made is an application for enforcement of the Award and it is not an application with respect to the arbitration agreement. It is further submitted that it is clear from the definition of the term “Court” found in the Act that the Court which could have entertained a suit on the subject matter of arbitration is the Court which can entertain a petition under Section 34 of the Act. It is submitted that the petitioner carries on business within the jurisdiction of this Court therefore, had the respondent instead of making reference to arbitrator, filed a Civil suit, then this Court would have had the jurisdiction to entertain the suit under Order 12 of the Letters 9 Patent because the petitioner who would have been defendant in the suit carries on business within the jurisdiction of this Court. 3. The petitioner is challenging the validity of the Award on merits. It is submitted by the petitioner that the learned Arbitrator who made the Award had no jurisdiction to make the Award. It is submitted that the appointment of the arbitrator is contrary to the agreement between the parties and the law. It is submitted that the Arbitration clause between the parties contemplates appointment of one arbitrator by each of the parties and the two arbitrators appointing an Umpire. The arbitration clause provides for the arbitrator appointed by one of the parties becoming sole arbitrator on failure of the other party to appoint his arbitrator. It is submitted that there is no time limit fixed by the arbitration clause for the other party to make appointment of the arbitrator after one party has appointed his arbitrator. It is submitted that at no point of time, the petitioner was informed by the 10 respondent that if the petitioner does not make appointment of his arbitrator within the time stipulated in the notice, the arbitrator appointed by the respondent would become the sole arbitrator. It is submitted that as the arbitration clause does not specify any time limit for the other party to nominate his nominee and therefore, the appointment is to be made by the other party within a reasonable time. In the submission of the petitioner, the party which appoints the arbitrator first will have to stipulate the time which according to that party is a reasonable time for the other party to make appointment of his arbitrator and state in that letter itself that if the other party fails to make the appointment within the stated time, it will be treated as his failure to appoint the second arbitrator and the arbitrator appointed by the first party will become, as agreed, the sole arbitrator. The respondent without fixing any time which according to him would be reasonable time cannot say that the arbitrator appointed by him is entitled to act as sole arbitrator. It is further submitted that in view of the provisions of 11 Section 11 of the Act, now if one party fails to appoint its nominee on the arbitral tribunal, it is only the judicial authority under Section 11 of the Act which can make appointment and therefore, the Award made by the sole Arbitrator is illegal. 4. For the purpose of deciding the objection raised to the maintainability of this petition before this Court by the respondent, first the provisions of Section 42 of the Act have to be seen. Section 42 of the Act reads as under:- “42. Jurisdiction Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings 12 shall be made in that Court and in no other Court.” Perusal of the above quoted provision shows that in order to attract the provisions of Section 42 of the Act, the first application should be an application made to a Court. The term “Court” is defined by Section 2(e) of the Act which reads as under:- “2(e) “court” means the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;” According to the respondent before this petition was filed in this Court the respondent had filed an 13 application under Section 9 which is in part I of the Act. Hence, all subsequent applications can be filed before the Baroda Court where the first application under Section 9 of the Act was filed. According to the petitioner, the application made by them under Section 11 of the Act was filed even before the award was made and that application was made to this Court therefore, the application filed by the respondent before the Baroda Court after the award was made will not bar them from filing present petition before this Court. In support of the submission that Judicial authority to whom application under Section 11 of the Act is made is a Court within the meaning of Section 2(e) of the Act, the petitioner relies on the Judgment of the Supreme Court in the case “M/s.S.B.P. & Co. Vs. M/s.Patel Engineering Ltd. and anr. 2005(9) Scale 1” referred to above. It is clear from the provisions of Section 2(e) of the Act that in order that a Judicial authority can be termed as Court for the purpose of the Act it must be shown that the relevant Judicial authority is the principle Court of original Civil Jurisdiction. Reading of the Judgment of the Supreme Court in the case of “Patel 14 Engineering Ltd.” referred to above shows that the Supreme Court has held that the power exercised by the authority to which application under Section 11 of the Act can be made is Judicial power and not administration power and therefore, the order made by that authority is a Judicial order. The question whether the authority exercising power under Section 11 of the Act is a Court within the meaning of the Act or not was neither raised in that case nor has it been decided by the Supreme Court. The submission of the learned Counsel for the petitioner that though the question was not raised before the Supreme Court the observations made in the majority Judgment of the Supreme Court support his contention, has no substance, in my opinion, the observations of the Supreme Court in paragraph 12, 14 and 17 which are quoted below indicate exactly to the contrary. “12. It is common ground that the Act has adopted the UNCITRAL Model Law on International Commercial Arbitration. But at the same time, it has made some departures from the model law. Section 11 is in the place of Article 11 of the Model Law. The Model Law provides for the making of a 15 request under Article 11 to “the court or other authority specified in Article 6 to take the necessary measure”. The words in Section 11 of the Act, are “the Chief Justice or the person or institution designated by him”. The fact that instead of the court, the powers are conferred on the Chief Justice, has to be appreciated in the context of the statute. “Court” is defined in the Act to be the principal Civil Court of original jurisdiction of the district and includes the High Court in exercise of its ordinary original civil jurisdiction. The principal civil court of original jurisdiction is normally the District Court. The High Courts in India exercising ordinary original civil jurisdiction are not too many. So in most of the States the concerned court would be the District Court. Obviously, the Parliament did not want to confer the power on the District Court, to entertain a request for appointing an arbitrator or for constituting an arbitral tribunal under Section 11 of the Act. It has to be noted that under Section 9 of the Act, the District Court or the High Court exercising 16 original jurisdiction, has the power to make interim orders prior to, during or even post arbitration. It has also the power to entertain a challenge to the award that may ultimately be made. The framers of the statute must certainly be taken to have been conscious of the definition of 'court' in the Act. It is easily possible to contemplate that they did not want the power under Section 11 to be conferred on the District Court or the High Court exercising original jurisdiction. The intention apparently was to confer the power on the highest judicial authority in the State and in the country, on Chief Justices of High Courts and on the Chief Justice of India. Such a provision is necessarily intended to add the greatest credibility to the arbitral process. The argument that the power thus conferred on the Chief Justice could not even be delegated to any other Judge of the High Court or of the Supreme Court, stands negatived only because of the power given to designate another. The intention of the legislature appears to be clear that it wanted to ensure that the power under Section 11(6) of the Act was exercised 17 by the highest judicial authority in the concerned State or in the country. This is to ensure the utmost authority to the process of constituting the arbitral tribunal.” 14. Normally a persona designata cannot delegate his power to another. Here, the Chief Justice of the High Court or the Chief Justice of India is given the power to designate another to exercise the power conferred on him under Section 11(6) of the Act. If the power is a judicial power, it is obvious that the power could be conferred only on a judicial authority and in this case, logically on another Judge of the High Court or on a Judge of the Supreme Court. It is logical to consider the conferment of the power on the Chief Justice of the High Court and on the Chief Justice of India as presiding Judges of the High Court and the Supreme Court and the exercise of the power so conferred, is exercise of judicial power/authority as presiding Judges of the respective courts. Replacing of the word 'court' in the Model Law with the expression “Chief Justice” in the Act, appears to be more 18 for excluding the exercise of power by the District Court and by the court as an entity leading to obvious consequences in the matter of the procedure to be followed and the rights of appeal governing the matter. The departure from Article 11 of the Model Law and the use of the expression “Chief Justice” cannot be taken to exclude the theory of its being an adjudication under Section 11 of the Act by a judicial authority. 17. It is true that the power under Section 11(6) of the Act is not conferred on the Supreme Court or on the High Court, but it is conferred on the Chief Justice of India or the Chief Justice of the High Court. One possible reason for specifying the authority as the Chief Justice, could be that if it were merely the conferment of the power on the High Court, or the Supreme Court, the matter would be governed by the normal procedure of that Court, including the right of appeal and the Parliament obviously wanted to avoid that situation, since one of the objects was to restrict the interference by Courts 19 in the arbitral process. Therefore, the power was conferred on the highest judicial authority in the country and in the State in their capacities as Chief Justices. They have been conferred the power of the right to pass an order contemplated by Section 11 of the Act. We have already seen that it is not possible to envisage that the power is conferred on the Chief Justice as persona designata. Therefore, the fact that the power is conferred on the Chief Justice, and not on the court presided over by him is not sufficient to hold that the power thus conferred is merely an administrative power and is not a judicial power.” According to the provisions of Section 2(e) of the Act District Court is the principal Court of original civil jurisdiction in a district, but the Supreme Court by its judgment in the case of “M/s.Patel Engineering Ltd. & another” totally excluded district Judge from the proceedings under Section 11 of the Act. In my opinion, the authority designated by Section 11 of the Act as competent to exercise power 20 under this provision can not be termed as the court for the purpose of the Act though now the Supreme Court has held that the power exercised by that authority is a Judicial power. Therefore, the application made by the petitioner under Section 11 of the Act is totally irrelevant so far as the provisions of Section 42 of the Act are concerned, because the application contemplated by Section 42 of the Act is an application made to the Court and to a Judicial authority which is not a Court of original civil Jurisdiction. 5. The application made by the respondent before the Baroda Court is filed under Section 9 of the Act, in so far as that application is concerned, following can be taken as undisputed positions:- (a) That the application has been filed by the respondent under Section 9 of the Act. (b) That an application under Section 9 of the Act can be made to a 'Court' and that the Baroda Court to whom the application has been made is a 'Court' 21 within the meaning of the Act. (c) That the award was made on 31.3.2005 and was communicated on 6.4.2005. (d) That the application before the Baroda Court was filed on 5.5.2005, under Section 9 of the Act for directing the petitioner to deposit the amount awarded to the respondent by the Award or in the alternative security. (e) That present petition was filed in the Court on 29.6.2005. (f) That till 29.6.2005 neither the respondent nor the Baroda Court informed the petitioner that on 5.5.2005 application under Section 9 of the Act has been filed. (g) That the period of three months provided by Section 34 of the Act for filing petition under that provision expired on 7.7.2005. (h) That the petitioner got knowledge that application under Section 9 of the Act has been filed by the respondent because he was served with the notice from the Baroda 22 Court either on 14.7.2005 or on 20.7.2005. The submission of the petitioner is that the provisions of Section 42 of the Act should be so interpreted that they can not be used by the party in whose favour an award has been made to deny the party who is aggrieved by the Award, the remedy provided by the Act for challenging the Award. Reading of the provisions of Section 42 of the Act shows that in case where more than one Court has the jurisdiction over the subject matter of the arbitration, the Court which is moved first in