Case: Swadesh Kumar Agarwal Vs. Dinesh Kumar Agarwal &amp; Ors, etc., etc

2. The facts leading to the present appeals in a nutshell are as under: -2.1 That a dispute between the parties which as such is a family dispute for partition of the properties arose. It was referred to the sole Arbitrator. The learned Arbitrator was appointed as a sole Arbitrator by the parties themselves on 04.08.2008. The learned Arbitrator directed the parties to appear on 14.03.2009 for deciding the pending applications. On the request of the parties, the Arbitrator adjourned the hearing on 30.03.2009. No proceedings were undertaken on 30.03.2009 due to the fact that the sole Arbitrator was not available in town. Respondent No. 1 and 3 herein – parties to the arbitration proceedings revoked the mandate of the sole Arbitrator vide letters dated 11.07.2009. The letters were replied to by the sole Arbitrator. Thereafter, respondent No. 1 and 3 herein, parties to the arbitration proceedings filed applications under section 14(1)(a) of the Act, 1996 before the concerned Court (District Court) to terminate the mandate of the sole Arbitrator on the ground of delay in concluding the arbitration proceedings. The appellant herein filed an application under order VII Rule 11 of CPC for dismissal of the said applications under section 14 of the Act, 1996, submitting that there was no delay at all on the part of the sole Arbitrator and therefore, there was no question of terminating the mandate of sole Arbitrator under section 14(1)(a) of the Act, 1996. Vide order dated 15.07.2010, the learned Trial Court dismissed the application filed under order VII Rule 11 of CPC preferred by the appellant herein.2.2 Feeling aggrieved by the order passed by the learned Trial Court, rejecting the application under order VII Rule 11 of CPC, the appellant herein preferred present writ petition Nos. 11259/2010 and 11258/2010 before the High Court and pending the applications under section 14(1)(a) of the Act, 1996 one of the parties – Dinesh Kumar Agarwal preferred an arbitration case before the High Court under section 11(6) of the Act, 1996 and requested to terminate the mandate of the sole Arbitrator and to appoint a fresh Arbitrator. By the impugned judgment and order, the High Court has allowed Arbitration Case No. 29/2015 and has observed and held that there was undue and unreasonable delay on the part of the sole Arbitrator in concluding the arbitrating proceedings and his mandate stood terminated under section 14(1)(a) of the Act, 1996. Consequently, the High Court has appointed a fresh Arbitrator. By the impugned judgment and order, the High Court has also dismissed the writ petitions preferred by the appellant herein, in which the appellant challenged the order passed by the learned Trial Court rejecting the application under Order VII Rule 11 of CPC.2.3 Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the High Court terminating the mandate of sole Arbitrator under section 14(1)(a) of the Act, 1996, on an application filed under section 11(6) of the Act, 1996 and dismissing the writ petitions confirming the order passed by the learned Trial Court rejecting the application under Order VII Rule 11 of CPC, the appellant has preferred the present appeals.

Reasoning:
6.3 In the present case, the sole arbitrator was appointed by the parties themselves by mutual consent and in the absence of any written contract containing the arbitration agreement. Therefore, application under section 11(6) of the Act, 1996 in absence of any written agreement containing arbitration agreement was not maintainable at all.6.7 Therefore, on a conjoint reading of section 13, 14 and 15 of the Act, if the challenge to the arbitrator is made on any of the grounds mentioned in section 12 of the Act, the party aggrieved has to submit an appropriate application before the Arbitral Tribunal itself. However, in case of any of the eventualities mentioned in section 14(1)(a) of the Act, 1996 and the mandate of the arbitrator is sought to be terminated on the ground that the sole arbitrator has become de jure and/or de facto unable to perform his functions or for other reasons fails to act without undue delay, the aggrieved party has to approach the concerned court as defined under section 2(e) of the Act, 1996. The concerned court has to adjudicate on whether, in fact, the sole arbitrator/arbitrators has/have become de jure and de facto unable to perform his/their functions or for other reasons he fails to act without undue delay. The reason why such a dispute is to be raised before the court is that eventualities mentioned in section 14(1)(a) can be said to be a disqualification of the sole arbitrator and therefore, such a dispute/controversy will have to be adjudicated before the concerned court as provided under section 14(2) of the Act, 1996.So far as the termination of the mandate of the arbitrator and/or termination of the proceedings mentioned in other provisions like in section 15(1)(a) where he withdraws from office for any reason; or (b) by or pursuant to an agreement of the parties, the dispute need not be raised before the concerned court. For example, where the sole arbitrator himself withdraws from office for any reason or when both the parties agree to terminate the mandate of the arbitrator and for substitution of the arbitrator, thereafter, there is no further controversy as either the sole arbitrator himself has withdrawn from office and/or the parties themselves have agreed to terminate the mandate of the arbitrator and to substitute the arbitrator. Thus, there is no question of raising such a dispute before the court. Therefore, the legislation has deliberately provided that the dispute with respect to the termination of the mandate of the arbitrator under section 14(1)(a) alone will have to be raised before the court. Hence, whenever there is a dispute and/or controversy that the mandate of the arbitrator is to be terminated on the grounds mentioned in section 14(1)(a), such a controversy/dispute has to be raised before the concerned court only and after the decision by the concerned court as defined under section 2(e) of the Act, 1996 and ultimately it is held that the mandate of the arbitrator is terminated, thereafter, the arbitrator is to be substituted accordingly, that too, according to the rules that were applicable to the initial appointment of the arbitrator. Therefore, normally and generally, the same procedure is required to be followed which was followed at the time of appointment of the sole arbitrator whose mandate is terminated and/or who is replaced.7.1 It is to be noted that in the present case as such the application under section 14(2) of the Act, 1996 to terminate the mandate of the arbitrator was already pending before the concerned court on the ground that his mandate stood terminated in view of section 14(1)(a) of the Act, 1996.7.2 As observed hereinabove, there is a difference and distinction between the arbitrator to be appointed under section 11(5) and under section 11(6) of the Act, 1996. As observed above, even in the absence of any arbitration agreement in writing between the parties, with consent the parties may refer the dispute for arbitration and appoint a sole arbitrator/arbitrators by mutual consent and parties may agree mutually on a procedure for appointing an arbitrator or arbitrators even in the absence of any written agreement. In such a situation and failing an agreement referred to sub-section (2), the aggrieved party may approach the High Court for appointment of an arbitrator under sub-section (5) of section 11 and in such a situation sub-section (5) of section 11 shall be attracted. However, where there is a written agreement on the appointment procedure agreed upon by the parties and there is a failure to appoint an arbitrator or arbitrators, in that case, sub- section (6) of section 11 shall be attracted and an aggrieved party may approach the High Court for appointment of an arbitrator under sub-section (6) of section 11 of the Act, 1996. Therefore, an application under section 11(6) of the Act, 1996 shall be maintainable only in a case where there is a written agreement and/or the contract containing the arbitration agreement and the appointment procedure agreed upon by the parties, application under section 11(6) of the Act, 1996 shall be maintainable. Otherwise, the application under section 11(6) of the Act, 1996 shall not be maintainable.7.3 In the present case, the parties themselves agreed on a procedure for appointment of the arbitrator and appointed and nominated an arbitrator by mutual consent. Therefore, the application under section 11(6) of the Act, 1996 was not maintainable at all.8. Even otherwise, once the arbitrator was appointed by mutual consent and it was alleged that the mandate of the sole arbitrator stood terminated in view of section 14(1)(a) of the Act, 1996, the application under section 11(6) of the Act, 1996 to terminate the mandate of the arbitrator in view of section 14(1)(a) of the Act shall not be maintainable. Once the appointment of the arbitrator is made, the dispute whether the mandate of the arbitrator has been terminated on the grounds set out in section 14(1)(a) of the Act, shall not have to be decided in an application under section 11(6) of the Act, 1996. Such a dispute cannot be decided on an application under section 11(6) of the Act and the aggrieved party has to approach the concerned court as per sub-section (2) of section 14 of the Act. In the case of Antrix Corporation Limited (supra) in para 31 and 33, it is observed and held as under: -31. The matter is not as complex as it seems and in our view, once the arbitration agreement had been invoked by Devas and a nominee arbitrator had also been appointed by it, the arbitration agreement could not have been invoked for a second time by the petitioner, which was fully aware of the appointment made by the respondent. It would lead to an anomalous state of affairs if the appointment of an arbitrator once made, could be questioned in a subsequent proceeding initiated by the other party also for the appointment of an arbitrator. In our view, while the petitioner was certainly entitled to challenge the appointment of the arbitrator at the instance of Devas, it could not do so by way of an independent proceeding under Section 11(6) of the 1996 Act. While power has been vested in the Chief Justice to appoint an arbitrator under Section 11(6) of the 1996 Act, such appointment can be questioned under Section 13 thereof. In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one arbitrator already appointed in exercise of the arbitration agreement.33. Sub-section (6) of Section 11 of the 1996 Act, quite categorically provides that where the parties fail to act in terms of a procedure agreed upon by them, the provisions of sub-section (6) may be invoked by any of the parties. Where in terms of the agreement, the arbitration clause has already been invoked by one of the parties thereto under the ICC Rules, the provisions of sub-section (6) cannot be invoked again, and, in case the other party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement, his/its remedy would be by way of a petition under Section 13, and, thereafter, under Section 34 of the 1996 Act.9. Following the aforesaid decision in the subsequent decision of this Court in the case of S.P. Singla Constructions Private Limited (supra), it is observed and held by this Court that once the arbitrator had been appointed as per clause 65 of the agreement (in that case) and as per provisions of the law, the arbitration agreement could not have been invoked for second time.9.1 Now so far as reliance being placed upon the decisions of this Court by learned counsel appearing on behalf of respondent No. 1 in the cases of ACC Limited (supra) and Uttar Pradesh State Bridge Corporation Limited (supra) are concerned as such there cannot be any dispute with respect to the position of law laid down by this Court in the aforesaid decisions to the effect that in case of any of the eventualities occurring as mentioned in section 14 and 15 of the Act, 1996, the mandate of the arbitrator shall stand terminated. However, the question is in a case where there is a dispute/controversy on the mandate of the arbitration being terminated on the ground set out in section 14(1)(a) of the Act, whether such a dispute shall have to be raised before the concerned court defined under section 2(e) of the Act or such a dispute can be considered on an application under section 11(6) of the Act? Before this Court in the aforesaid decisions such a controversy was not raised. Therefore, the aforesaid decisions shall not be of any assistance to respondents and/or the same shall not be applicable to the facts of the case on hand, while deciding the issue, whether termination of the mandate of the arbitrator on the ground mentioned under section 14(1)(a) of the Act, 1996 can be decided under section 14(2) or under section 11(6) of the Act, 1996.10. It is to be noted that as such in the present case the proceedings before the concerned court under section 14(2) of the Act, 1996 at the instance of respondent No. 1 and 3 herein to terminate the mandate of the sole respondent under section 14(1)(a) of the Act were already pending before the concerned court when respondent No. 1 moved an application under section 11(6) of the Act and such a dispute was at large before the court in a proceeding under section 14(2) of the Act.11. In view of the aforesaid discussion and for the reasons stated above, it is observed and held as under: -(i) That there is a difference and distinction between section 11(5) and section 11(6) of the Act, 1996;(ii) In a case where there is no written agreement between the parties on the procedure for appointing an arbitrator or arbitrators, parties are free to agree on a procedure by mutual consent and/or agreement and the dispute can be referred to a sole arbitrator/arbitrators who can be appointed by mutual consent and failing any agreement referred to section 11(2), section 11(5) of the Act shall be attracted and in such a situation, the application for appointment of arbitrator or arbitrators shall be maintainable under section 11(5) of the Act and not under section 11(6) of the Act;(iii) In a case where there is a written agreement and/or contract containing the arbitration agreement and the appointment or procedure is agreed upon by the parties, an application under section 11(6) of the Act shall be maintainable and the High Court or its nominee can appoint an arbitrator or arbitrators in case any of the eventualities occurring under section 11(6) (a) to (c) of the Act;(iv) Once the dispute is referred to arbitration and the sole arbitrator is appointed by the parties by mutual consent and the arbitrator/arbitrators is/are so appointed, the arbitration agreement cannot be invoked for the second time;(v) In a case where there is a dispute/controversy on the mandate of the arbitrator being terminated on the ground mentioned in section 14(1)(a), such a dispute has to be raised before the court, defined under section 2(e) of the Act, 1996 and such a dispute cannot be decided on an application filed under section 11(6) of the Act, 1996.12. Now the next question which is posed for consideration of this Court is whether the learned Trial Court was justified in rejecting the application submitted by the appellant, which was filed to reject the applications under section 14 of the Act,in exercise of powers under Order VII Rule 11 of CPC is concerned, having gone through the averments in the application under Order VII Rule 11 of CPC, it appears and it is not in dispute that the application under section 14(2) of the Act was sought to be rejected on the ground that there was no undue delay on the part of the arbitrator and therefore, his mandate is not required to be terminated under section 14(1)(a) of the Act, 1996. However, such a dispute is to be adjudicated on merits by the concerned court before whom the proceedings under section 14(2) of the Act were initiated and at the most, it can be said to be the defence, which was to be adjudicated by the concerned court. As per the settled position of law, at the stage of deciding the application under Order VII Rule 11 of CPC only the averments and allegations in the application/plaint are to be considered and not the written statement and/or reply to the application and/or the defence. Therefore, as such the learned Trial Court rightly dismissed the application under Order VII Rule 11 of CPC.