Jayesh H.Pandya vs Subhtex India Limited Through Its ...

3. The order of the Division Bench of the High Court dated 20 th January, 2004 came to be challenged in a Special Leave Petition (Civil) No. 3919 of 2004 before this Court. This Court issued notice on 8th March, 2004 and stayed proceedings before the learned Arbitrator until further orders. Unfortunately, the sole Arbitrator appointed pursuant to Order dated 14th November, 2003 died in October, 2004. The said special leave petition was dismissed on 24th April, 2007 with the following observation as under:­ “Heard.

Parties are directed to appear before the learned Arbitrator on 4th of May, 2007 with a certified copy of this order for further directions. The address and contact numbers of the learned Arbitrator are as under:

4. Arbitrator shall follow the procedure of allowing parties to file their respective claims & contention and to file documents within reasonable time as the arbitrator may deem fit.

5.The arbitrator will make his award within a period of 4 months from the date of service of copy of agreement.

6. Indisputedly, the first preliminary meeting before the Arbitrator was held on 4th May, 2007. As per clause 5 of the terms of the agreement dated 28 th April, 2000, four months 5 period which was available at the disposal of the Arbitrator for passing of an award in the ordinary course of his business subject to extension with the consent of both the parties was to expire on 4th September, 2007. The claimant was permitted to file its statement of claims and a compilation of documents and the defendants to the arbitral proceedings(appellants) were to file written statement and counter claims on or before 6 th July, 2007 and thereafter a discovery and inspection was to be completed by 27th July, 2007 and the parties were directed to make their statements of admission and/or denials by 10th August, 2007, in respect of the documents disclosed. A preliminary meeting was to be held on 13th August, 2007. The fact which came on record is that the appellants alleged that they had received the statement of claim on 6 th June, 2007 and extension of time was sought for compilation of documents in order to file their written statement. The compilation of documents was received on 15 th June, 2007. The fact is that the time was consumed in exchange of claims and counter claims and compilation of documents. Date of 27th August, 2007 was fixed for hearing before the Arbitrator. In the course of hearing, it was urged by the appellants that even if the agreement dated 28th April, 2000 for 6 the sake for submission is to be taken as a genuine agreement, arbitration proceedings have to be culminated within a period of four months from the date of service of a copy of the agreement and the time could be extended only with the consent of both the parties. He further contended that the appellants had refused to consent to an extension of time; and since the Tribunal held its first meeting on 4th May, 2007, the arbitral proceedings could not be concluded within a period of four months; and no purpose is going to be served to continue the arbitral proceedings further, even with the hearing on the applications filed by the parties.

8. Indisputedly, no interim application was filed for extension of time or a clarification in this Court, as a result, jurisdiction to continue with the proceedings came to an end by passage of time on 4th September, 2007 and it was observed by the learned Arbitrator to continue with the arbitral proceedings and if the issue so urged by the parties is raised in writing, it could be decided at the appropriate stage. Accordingly, learned Arbitrator fixed a meeting on 26th October, 2007 in pursuance of the communication dated 3rd October, 2007. At this stage, the appellants filed a written application before the Arbitrator stating therein that the period of four months from the date of first preliminary meeting had expired on 4 th September, 2007 and the Arbitral Tribunal has become functus officio with no power to proceed with the arbitral proceedings any more. But that came to be rejected by the learned Arbitrator vide Order dated 31 st December, 2007 which came to be challenged by the appellants in Arbitration Petition( L) No. 59 of 2008 before the High Court of Judicature at Bombay invoking Section 14 of the Act, 1996 8 seeking a declaration that the Arbitrator has become de jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the parties has terminated. The arbitration petition filed at the instance of the present appellants came to be dismissed by the High Court under its Order dated 14th March, 2008 holding that the appellants by their conduct have waived their defence to enforce a punctilious observance of the time schedule of four months; and sustaining objection would frustrate the object and purpose of the arbitral proceedings and will bring the whole machinery provided by the Act to facilitate an efficacious recourse to arbitration into a grave peril which is a subject matter of challenge in the instant proceeding before us.

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

22. That apart, there is no provision under the arbitration agreement to condone the delay when agreement between the 20 parties binds them to see that the arbitration proceedings should be concluded within the time prescribed. This time restriction is well within the scope and purport of the Act, 1996 at national and international arbitrations.

24. Consequently, in our considered view, the appeal deserves to succeed and is accordingly allowed. The judgment and order of the High Court dated 14th March, 2008 is hereby set aside. 21 The respondents are at liberty to ventilate their grievance as admissible under the law. No costs.

25. Pending application(s), if any, stand disposed of.