Rajasthan Small Industries Corportion ... vs M/S Ganesh Containers Movers Syndicate

3. Brief facts which led to filing of this appeal are as under:- 

4. For one reason or other, the arbitration proceedings could not be concluded. According to the appellant, the matter was adjourned repeatedly vide orders of the Arbitral Tribunal dated 10.02.2010, 11.02.2010, 15.02.2010, 18.02.2010 and 10.03.2010 as no one appeared on behalf of the respondent-Contractor. On 16.03.2010, the respondent raised its doubts regarding impartiality of the newly appointed sole arbitrator. The sole arbitrator passed the order dated 06.04.2010 stating that the agreement Clause 4.20.1 of Schedule-4 (General Conditions) provides for arbitration by the Chairman-cum- Managing Director of the Corporation or his nominee and that only at the joint request of both the parties, the Chairman-cum-Managing Director has taken up the arbitration to resolve the dispute between the parties. The proceedings further continued fixing date of hearing on various dates till 17.08.2011.

5. On 07.02.2013, the respondent-Contractor sent a legal notice to the appellant stating that even after so many requests, the sole arbitrator has not passed the award and called upon the appellant to pay the amount of Rs.3,90,81,602/- said to have been settled, along with the statutory interest within one month. The appellant sent a reply dated 19.03.2013 stating that since the Chairman-cum- 3 Managing Director has been transferred, award could not be passed and there is no question of payment to the respondent-Contractor.

6. On 13.05.2015, the respondent-Contractor filed an application under Section 11(6) and Section 15 of the Arbitration and Conciliation Act, 1996 before the High Court seeking for appointment of an independent arbitrator for adjudication of dispute between the appellant and the respondent in respect of agreement dated 28.01.2000. On 18.12.2015, it was brought to the notice of the arbitrator that an arbitration application has been filed before the High Court. On 05.01.2016, the Arbitral Tribunal adjourned the matter to 13.01.2016 as a last opportunity of hearing to the parties. On 13.01.2016, the arbitrator rejected the application of the respondent-Contractor and his request to adjourn the matter till hearing and final disposal of the arbitration application pending before the High Court and held that the arbitration proceedings would be finalized on the basis of available facts and therefore, adjourned the matter to 21.01.2016. The sole arbitrator passed an ex-parte award on 21.01.2016.

7. The High Court vide impugned order allowed the arbitration application thereby appointing Mr. J.P. Bansal (Retd.), District Judge as the sole arbitrator. The High Court held that the respondent- 4 Contractor had to approach the High Court due to prolongation of the matter before the sole arbitrator who kept on changing one after another and only after the notice of the arbitration petition was served upon the appellant-Corporation, the arbitrator speeded up the proceedings and the ex-parte award was passed on 21.01.2016 without hearing the respondent-Contractor. The High Court was of the view that the arbitrator hurried up to conclude the proceedings with a view to frustrate the arbitration application.

12. In order to appreciate the points, it is necessary to refer to the details of various proceedings before the arbitrator, before the respondent-Contractor approached the High Court. In terms of Clause 4.20.1, I.C. Shrivastava, IAS (Retd.) was appointed as sole arbitrator by order dated 21.02.2005. Since the progress of the arbitration proceedings before the said arbitrator was not satisfactory, vide order No.RSIC/Legal/08-09/23999-24001 dated 26.03.2009, appointment of I.C. Shrivastava, IAS (Retd.) as arbitrator was withdrawn. Since records were not received from the said arbitrator, an order was passed on 13.08.2009 in the presence of both the parties, wherein it was agreed that the records of the case are to be reconstructed and by the same order, it was decided to request Additional Chief Secretary (SSI), Rukmani Haldea, IAS to be the sole arbitrator. However, subsequently by the consent of both 9 the parties Chairman-cum-MD of the appellant-Corporation was appointed as the sole arbitrator.

13. The matter was adjourned before the arbitral tribunal on 24.11.2009 and 30.11.2009 and other dates. It is seen from the order of the arbitral tribunal dated 08.01.2010, the earlier arbitrator was requested number of times to handover the records connected with the case; but he had not handed over the records and therefore, parties were advised to exchange records so that the proceedings could begin and the matter was adjourned. In the subsequent hearing on 25.01.2010, both the parties were represented by their counsel and therefore, the matter was adjourned to 08.02.2010 for final arguments. On 08.02.2010, arguments of the respondent-claimant was heard in part and the case was adjourned to 10.02.2010 on account of paucity of time. On the subsequent hearing dates viz. 10.02.2010, 11.02.2010, 15.02.2010, 18.02.2010 and 10.03.2010, there was no representation for the respondent-claimant and the matter was adjourned to 17.03.2010. Respondent-Contractor vide its letter dated 16.03.2010 addressed to the Chairman and Managing Director of the appellant-Corporation raised doubts on impartiality of the arbitrator expressing his desire to withdraw the arbitration from 10 the present sole arbitrator and was willing to get the matter adjudicated by the pervious arbitrator, I.C. Shrivastava who was already removed at the joint request of the parties. By letter dated 18.03.2010, respondent requested for adjournment of the matter. On the next date of hearing i.e. on 19.03.2010, the respondent- Contractor has not entered appearance and the matter was adjourned to 06.04.2010. On 06.04.2010, the respondent-Contractor was appeared through its representative F.K. Sherwani. As seen from the proceeding of arbitrator dated 06.04.2010, though initially pressed for arbitrator outside appellant-RSIC, finally gave his consent that Chairman-cum-Managing Director may arbitrate.

15. For want of reconciliation of records of the parties and certain clarifications, by order dated 24.03.2011, the arbitrator directed both the parties to appear before him on 18.04.2011 along with complete records relating to the claim and counter claim. On the next hearing dates i.e. 20.04.2011 and 21.04.2011, there were detailed discussions between the parties and the sole arbitrator and accordingly, the respondent-Contractor agreed to withdraw certain claims. By various correspondence dated 21.04.2011, 18.05.2011, 20.05.2011 and 24.05.2011, the arbitrator required certain clarifications from both the parties to finalise the award and replies were also received. On 17.08.2011, in the presence of both the parties, the arbitral tribunal passed the following order:-

19. As seen from the order dated 21.10.2010, the respondent submitted that “they do not want to prolong the matter further and they have full faith in the present sole arbitrator and that they would like the sole arbitrator to decide the case and pass an award on the basis of material available on record at the earliest.” As stated earlier, to that effect, Shri Ram B. Salve, sole proprietor of the respondent had also given a letter dated 21.10.2010. Since the papers were missing or incomplete, in the presence of both the parties, the arbitral tribunal vide its order dated 17.08.2011 has decided that the chronological events need to be ascertained and reconstruction will be required and a detailed order will be passed 14 informing both the parties in this regard. As seen from the proceedings of the arbitral tribunal till that time, the respondent voluntarily participated and acquiesced in the proceedings before the arbitral tribunal and also expressed faith in the sole arbitrator. Having thus voluntarily participated in the arbitral proceedings, the respondent has sent a legal notice dated 07.02.2013 to the appellant-Corporation stating that in the arbitral proceedings, the respondent mutually agreed to the claim and the matter was settled for a sum of Rs.3,90,81,602/- and that in spite of repeated requests, the amount was not paid to the respondent. The respondent also sent another legal notice dated 07.03.2013 reiterating its demand for payment of Rs.3,90,81,602/-. To that effect, the appellant- Corporation has sent a detailed reply dated 19.03.2013.

20. It is in this backdrop, the respondent has filed the arbitration petition before the High Court under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 on 13.05.2015 seeking appointment of an independent arbitrator. As noted earlier, as per Clause 4.20.1 of Schedule-4 (General Conditions), the parties have agreed that all disputes and differences arising out of or in any way concerning the contract, shall be referred to the Managing Director himself or his nominees for the sole arbitration and that there will be 15 no objection to any such appointment on the ground that the person so appointed is an employee of the Corporation and that he has dealt with the matter to which the contract relates. When the parties have consciously agreed that the disputes or differences shall be referred to the Managing Director himself or his nominee for sole arbitration and having participated in the arbitral proceedings before arbitrator for quite some time, the respondent cannot turn round and seek for appointment of an independent arbitrator.

alleging that the said amount was settled during the course of proceedings before the Arbitral Tribunal. Reiterating the demand, the respondent has again sent the legal notice on 07.03.2013. However, no award came to be passed. The respondent filed application under Sections 11 and 15 of the Act of 1996 on 13.05.2015 seeking appointment of an independent arbitrator for adjudication of the disputes and differences between the appellant and the respondent.

35. Remedy to the Respondent-Contractor:- The award passed by the arbitrator dated 21.01.2016, whether sustainable, is the next question falling for consideration. As discussed earlier, after 17.08.2011 the Arbitral Tribunal could not make progress and as per the proceeding of the Arbitral Tribunal dated 17.08.2011, the arbitrator observed that the “…..missing papers are incomplete…..the chronological events need to be ascertained and reconstitution will be required….”. As pointed out earlier, the respondent filed application under Sections 11 and 15 of the Act of 1996 before the High Court on 13.05.2015. As per the proceedings of the Arbitral Tribunal dated 18.12.2015, the arbitration application before the High Court was brought to the notice of the tribunal and the same was recorded. On 05.01.2016, the respondent prayed for keeping the arbitration proceedings in abeyance and the matter was adjourned for 13.01.2016. The Arbitral Tribunal passed a detailed order on 13.01.2016 stating that the matter is pending for quite some time and on the basis of the available facts and materials, the 27 matter will be finalized and adjourned the matter for 21.01.2016. On the basis of available materials, the Arbitral Tribunal passed the final award on 21.01.2016 awarding a sum of Rs.1,38,000/-, Rs.83,000/- and Rs.1,97,110/- in respect of claims at Serial Nos.3, 4 and 9 respectively to the claimant and the respondent’s claim in respect of other claims was rejected. So far as the counter claim of the appellant-Corporation in respect of Serial No.17, the arbitrator awarded a sum of Rs.58,39,018/-.

39. In the result, the impugned order of the High Court dated 22.04.2016 is set aside and this appeal is allowed. The present Managing Director of the appellant-Rajasthan Small Industries Corporation Limited shall be the sole arbitrator and the Managing Director is directed to take up the matter and continue the proceedings and afford sufficient opportunity to both the parties to adduce further evidence and to make oral submissions and pass the final award within a period of four months. It is made clear that the arbitrator may not be influenced by any of the views expressed by the High Court.

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