Arbitration Case No. 51 of 2009 [1] IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH [1] Arbitration Case No. 51 of 2009 Date of Decision: 8.3.2010 Rajpinder Kaur ..Petitioner Versus Hindustan Petroleum Corporation Ltd. and another ..Respondents --- [2] Arbitration Case No. 140 of 2008 (O&M) Rajpinder Kaur ..Petitioner Versus Hindustan Petroleum Corporation Ltd. and another ..Respondents CORAM: HON'BLE MR. JUSTICE MUKUL MUDGAL, CHIEF JUSTICE 1.Whether Reporters of local papers may be allowed to see the judgment ? 2. Whether to be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest? Present :- Mr. Hemant Saini, Advocate, for the petitioner in both the cases. Mr. Anil Malhotra, Advocate, for the respondents in both the cases. *** Arbitration Case No. 51 of 2009 [2] MUKUL MUDGAL, C.J. (Oral) This order shall dispose of two arbitration cases No. 140 of 2008 and 51 of 2009. Arbitration Case No. 140 of 2008 has been filed by the petitioner under Section 11 read with sections 8, 9 and 12 of the Arbitration & Conciliation Act, 1996 (for short ' the Act), primarily for staying the proceedings before the Arbitrator appointed by the Managing Director, as per the arbitration clause, and secondly for appointment of an independent Arbitrator preferably a retired High Court Judge of this Court as a sole Arbitrator to adjudicate upon the disputes between the parties. Second petition namely Arbitration Case No. 51 of 2009 has been filed under Section 11 of the Act for appointment of an independent Arbitrator preferably a Judicial Officer. 2. There is no dispute with regard to the arbitration clause and relevant Clause 39 of the agreement contains the Arbitration Clause which reads as under:- 39. Any dispute or difference of any nature whatsoever or regarding any rights, liability act, omission or account of any of the parties hereto arising out or in relation to this agreement shall be referred to the sole arbitrator of the Managing Director of the Corporation or of some officer of the Corporation who may be nominated by the Managing Director. The Dealer will not be entitled to raise any objection to any such arbitration on the ground that the arbitrator is an office of the Corporation or that he has to deal with the matter to which the contract relates to that in the course of his duties as an officer of the Corporation he had expressed views on all or any other matters in dispute or difference. In the event Arbitration Case No. 51 of 2009 [3] of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reasons, the Managing Director as aforesaid at the time of such transfer vacation of office or liability to act, shall designate another person to act as arbitrator in accordance with the terms of the agreement. Such persons shall be entitled to proceed with the reference from the point at which it was left by his predecessor, it is also a term of this contract that no person other than the Managing Director of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final, conclusive and binding on all the parties to the agreement subject to the provision of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under this clause. The award shall be made in writing and published by the Arbitrator “within six months after entering upon the reference or within such extended time not exceeding further four months as the sole arbitrator shall by a writing under his own hands appoint. The arbitrator shall have power to order and direct either of the parties to abide by, observe and perform all such directions the arbitrator may think fit having regard to the matter in difference i.e. Dispute before him. The arbitrator shall have all summary powers and may take such evidence, oral and/or documentary as the arbitrator in his absolute discretion thinks it and shall be entitled to exercise all power under Arbitration Case No. 51 of 2009 [4] the Indian Arbitration Act, 1940 including admission of any affidavit as evidence or the matter in difference i.e. dispute before him. The arbitrator shall be at liberty to appoint, if necessary any accountant or engineering or other technical person to assist him, and to act by the opinion so taken. The arbitrator shall have power to make one or more awards whether interim or otherwise in respect of the dispute and difference and in particular will be entitled to make separate awards in respect of claims or cross claims of the parties. The parties hereby agree that the courts in the city of ________alone shall have jurisdiction to entertain any application or other proceeding in respect of anything arising under this agreement and any award or awards made by the sole arbitrator hereunder shall be filed in the concerned Courts if he city of _______________only.” 3. It is admitted case of the parties that a dispute had arisen between the parties and on invocation of the arbitration clause, Mr. A.M.Attri, an officer of Hindustan Petroleum Corporation Ltd. was appointed as an Arbitrator. However, later on the petitioner objected to his appointment vide letter dated 16.08.2008 doubting his integrity and impartiality, therefore, the respondents pursuant to the receipt of that letter substituted the said Arbitrator by making the appointment of Mr. V.Vizia Saradhi as a sole Arbitrator to whom the dispute now stands referred to. Feeling aggrieved of the appointment of Mr. V.Vizia Saradhi as an Arbitrator, the petitioner firstly filed an arbitration Arbitration Case No. 51 of 2009 [5] petition No. 140 of 2008 on 30.10.2008 under Section 11 read with Sections 8, 9 and 12 of the Act for staying the proceedings before the Arbitrator with a further prayer for appointment of an independent Arbitrator preferably a former Judge of this Court. 4. When the aforesaid arbitration case came up for hearing before the then Chief Justice on 14.11.2008, learned counsel for the petitioner gave up the prayer for appointment of an independent Arbitrator with liberty to seek appropriate redress in a separate petition, if so advised, and confined his prayer only with regard to interim relief under Section 9 of the Act. 5. After passing of the aforesaid order on 14.11.2008, the petitioner filed another arbitration petition namely Arbitration Case No. 51 of 2009 on 11.5.2009 under Section 11(6) of the Act for appointment of an independent Arbitrator preferably a Judicial Officer. That is how both the petitions have come up for hearing before me. 6. Firstly I am taking up Arbitration Case No. 51 of 2009 which has been filed under Section 11(6) of the Act for appointment of an independent Arbitrator, for disposal. 7. Learned counsel for the petitioner while addressing arguments sought to raise an issue that the respondents did not have any power to substitute the Arbitrator as clause 39 of the agreement relating to arbitration, because that clause only empowers the respondents to do so in the event of transfer of the arbitrator or vacating his office or unabling to act for any reasons. Since in this case, there was no such situation, therefore, this Court alone has a right to substitute the Arbitrator. In support of his arguments, he has placed Arbitration Case No. 51 of 2009 [6] reliance upon Union of India v. Singh Builders Syndicate 2009(4) Supreme Court Cases, 523 especially the view taken by the Hon'ble Supreme Court in para No. 14 whereof which is to the following effect:- “It was further held in Northern Railway case that the Chief Justice or his designate should first ensure that the remedies provided under the arbitration agreement are exhausted, but at the same time also ensure that the twin requirements of sub-section (8) of section 11 of the Act are kept in view. This would mean that invariably the court should first appoint the Arbitrators in the manner provided for in the arbitration agreement. But where the independence and impartiality of the Arbitrator/s appointed/nominated in terms of the arbitration agreement is in doubt, or where the Arbitral Tribunal appointed in the manner provided in the arbitration agreement has not functioned and it becomes necessary to make fresh appointment, the Chief Justice or his designate is not powerless to make appropriate alternative arrangements to give effect to the provision for arbitration.” (emphasis supplied) 8. On the other hand, learned counsel for the respondents controverted the aforesaid arguments on the ground that the arbitration clause itself has a provision for substitution of the Arbitrator as it provides that in the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reasons, the Managing Director as aforesaid at the time of such transfer vacation of office or inability to act,shall designate another person to act as arbitrator in accordance with the terms of the agreement. Since the petitioner herself had raised a finger on the Arbitration Case No. 51 of 2009 [7] impartiality of Mr. Attri, vide her letter dated 16.8.2008 the respondents had substituted Mr. Attri and appointed Mr. V.Vizia Saradhi as an Arbitrator. 9. After hearing learned counsel for the parties and on going through the arbitration clause, I am of the view that the argument raised by Mr. Saini, learned counsel appearing for the petitioner is not sustainable because in order to avail the benefit of ratio laid down by the Hon'ble Supreme Court in Singh Builder's case (supra), a party seeking substitution of the Arbitrator is required to prove that the independence and impartiality of the Arbitrator is shrouded in doubt or the said Arbitrator is non-functional. In this case, learned counsel for the petitioner has failed to prove that the Arbitrator now appointed is not independent or impartial or is non-functional. When the petitioner had raised a doubt about the impartiality of Mr. Attri who was appointed as an Arbitrator at the first instance, though without any material evidence proving her apprehension, the respondents replaced him and appointed the present incumbent to adjudicate upon the dispute only to ally the apprehension qua impartiality of Mr. Attri. 10. During the course of arguments, Mr. Saini made a statement that Mr. Attri had orally shown his unwillingness to continue with the arbitration proceedings and asked the petitioner to go to the Court for his substitution. According to Shri Saini even this statement itself is a reason falling under Clause 39 of the agreement to show that arbitrator did not intend to continue and shown his inability to continue with the arbitration proceedings, hence necessitated his substitution by another Arbitrator. Thus the argument raised by learned counsel for the Arbitration Case No. 51 of 2009 [8] petitioner that substitution ought to have been made by the Court, in my view is not the correct interpretation of clause 39 of the agreement that this Court alone has the right to substitute the in exercise of the powers enshrined under Section 11 of the Act. If the course suggested by Mr. Saini learned counsel for the petitioner is accepted, all the parties who do not want to continue with the arbitration proceedings initiated by a nominated Arbitrator, whom they do not want as an Arbitrator, would raise such pleas and in such a situation if such a plea is accepted, the right to appoint/substitute the Arbitrator provided in the agreement would disappear. The Hon'ble Supreme Court in the above cited judgment has clearly laid down a position of law that unless the Arbitrator is found to be lacking in impartiality or the Arbitral Tribunal non-functional, an independent Arbitrator can not be appointed by a Court exercising powers under Section 11(6) of the Act. In the present case none of the said situations exist. The present Arbitrator is continuing with the proceedings. The petitioner has, in the petition, no where alleged any reason suspecting impartiality of the present incumbent Mr. V.Vizia Saradhi. Even during the course of arguments, Mr. Saini failed to point out any instance showing that Mr. V.Vizia Saradhi is not acting independently or impartially or is non-functional nor has he been able to point out any material evidence to show that Mr. A.M.Attri was not working independently or impartially except a statement made before me that the said arbitrator had asked the petitioner to move the Court for his substitution. Even the letter written by the petitioner for removal of Mr. Attri has not been brought on record by the petitioner. All these facts show that petitioner has failed Arbitration Case No. 51 of 2009 [9] to prove the lack of independence or impartiality of Mr. Attri who was earlier appointed or that of Mr. V.Vizia Saradhi who is now continuing with the proceedings of the case. 11. Consequently, in view of the law laid down by the Hon'ble Supreme Court in Singh Builder's case (supra), this petition is liable to be dismissed. 12. At this stage, Mr. Saini, learned counsel for the petitioner has raised another issue that before making appointment of Mr. Attri as an Arbitrator, a penalty of Rs. 27,60,610/- had been levied upon the petitioner without following any procedure even then the petitioner was ready to pay the same, therefore, there was no necessity for appointment of an Arbitrator. 13. This argument raised by learned counsel for the petitioner is without any merit because the Chief Justice or its nominee while exercising powers under Section 11(6) of the Act cannot go into the the question whether a penalty imposed was proper or not. It is a question which could be raised before the Arbitrator if permissible under law. 14. In view of the aforesaid discussion, I do not find any merit in arbitration petition No. 51 of 2009 filed under Section 11 of the Act and the same is hereby dismissed. Arbitration Case No. 140 of 2008 15. Consequent to the dismissal of the arbitration petition No. 51 of 2009, arbitration petition No. 140 of 2008 filed under Section 9 of the Act primarily is not maintainable in this Court as Section 9 of the Act provides that such a petition could be filed before a 'Court'. The word 'Court' has been defined in Section 2 (e) of the Act which reads as Arbitration Case No. 51 of 2009 [10] under:- “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;” 16. As per Punjab Courts Act, the Court of District Judge is a Principal Civil Court of original jurisdiction. This Court does not exercise the original jurisdiction in respect of ordinary original Civil jurisdiction. 17. Faced with this situation, Mr. Saini seeks leave to withdraw the petition with liberty to approach the appropriate forum available in law. Accordingly, this petition is dismissed with the aforesaid liberty. (MUKUL MUDGAL) CHIEF JUSTICE 08.03.2010 'ravinder'