Case: JAYESH H.PANDYA Vs. SUBHTEX INDIA LIMITED THROUGH ITS DIRECTOR

2. The seminal facts in brief relevant for the present purpose are that the appellants are partners of a partnership firm by the name Hetali Construction Company. The first respondent is a company incorporated under the Companies Act, 1956 and is a claimant in the arbitral proceedings which was initiated pursuant to the arbitration agreement dated 28th April, 2000. The first respondent Subhtex India Limited instituted an application under Section 11 of the Arbitration and Conciliation Act, 1996(hereinafter being referred to as the ?Act 1996?) for appointment of an Arbitrator in A.P. No. 150 of 2003 before the High Court of Judicature at Bombay despite resistance by the present appellants that the agreement dated 28th April, 2000 was a collusive and a forged document. Initially, by an Order dated 14th November, 2003, late Shri Justice V.D. Tulzapurkar, former Judge of this Court was appointed as a sole Arbitrator without prejudice to the rights and contentions of the parties and it was clarified that the views expressed in the order dated 14th November, 2003 about the existence, validity and effect of the arbitration agreement were prima facie and it would be open to be examined by the learned Arbitrator under Section 16 of the Act, 1996. The order passed by the Single Judge of the High Court dated 14th November, 2003 was a subject matter of challenge in a writ petition filed under Article 226 of the Constitution of India which was dismissed vide judgment and order dated 20th January, 2004 with an observation that adequate remedies are available under Section 16 of raising all contentious issues relating to the existence of the arbitration agreement and constitution of the Arbitral Tribunal, before the Tribunal.The order of the Division Bench of the High Court dated 20th 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 14 th November, 2003 died in October, 2004. The said special leave petition was dismissed on 24th April, 2007 with the following observation asthe facts and circumstances of the present case, we are not inclined to exercise our jurisdiction under Article 136 of the Constitution of India. The special leave petition isare informed that Mr. Justice V.D. Tulzapurkar, former Judge of this Court, who was appointed as the Arbitrator, has passedfor the parties are agreed that Hon?ble Mr. Justice S.N. Variava, a former Judge of this Court be appointed in place of Mr. Justice V.D. Tulzapurkar, as the Arbitrator. We order accordingly. Learned Arbitrator shall fix his remunerationthe points including the existence, validity and enforceability of the contract, as indicated by the Division Bench in its Judgment, shall be decided by the learnedare 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 asai – 400Nos. (022) 23620614,of this order be sent to the learned Arbitrator.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 deemarbitrator will make his award within a period of 4 months from the date of service of copy ofarbitrator shall have power to extend the period for making and publishing the award from time to time, with the consent of both theArbitrator shall give reasons for hisarbitrator will follow provisions of Arbitration & Reconciliation Act,parties here to and the parties represented by party of the first part be bound by the award that will be given by arbitrator.In terms of the conditions of the agreement dated 28th April, 2000, apart from the procedure to be followed by the Arbitrator, he was under an obligation to make his award within a period of four months from the date of service of copy of agreement with a proviso that the Arbitrator would have the power to extend the period for making and publishing the award, with the consent of both the parties.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 28th April, 2000, four months 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 6th 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 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.On objection being raised by the appellants before the learned Arbitrator, in his meeting on 27th August, 2007, it was observed that had this point been urged on 4th May, 2007, a shorter time frame could have been fixed and dates would have been allotted and proceedings could have been completed within time. In the given circumstances, it would be more appropriate if the claimants obtain an extension of time or a clarification from this Court that the time could be extended of the Tribunal even without the consent of the parties to the arbitral proceedings. The matter was adjourned for obtaining extension of time or a clarification from this Court.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 3 rd 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 4th 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 31st 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 seeking a declaration that the Arbitrator has becomede jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the partieshas terminated. The arbitration petition filed at the instance of the present appellants came to be dismissed by the High Court under its Order dated 14 th 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.

Court's reasoning:
14. From the records before us, it is established that the Arbitrator was unable to complete the arbitral proceedings within four months from the date of the first preliminary meeting held on 4th May, 2007 in terms of clause (5) of the arbitration agreement and objection to extend the time was recorded by the appellants before the Arbitrator. The Arbitrator having failed to do so rejected their application by an Order dated 31st December 2007 that came to be challenged by the appellant invoking Section 14 of the Act 1996 by filing an Arbitration Petition in the High Court of Bombay with a declaration that the Arbitrator has becomeje jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the partiesstood terminated which came to be dismissed by the High Court under the impugned judgment dated 14th March, 2008.It is clear from the bare reading of sub-section 1(a) of Section 14 that mandate of an arbitrator shall terminate if it fails to act without undue delay. In the present case, the first preliminary meeting was held on 4th May, 2007 and the Arbitrator in terms of the agreement was supposed to conclude and pass the award within a period of four months which indisputedly stood expired on 4th September, 2007 and in the meantime the appellants recorded their objection of not consenting for extension of time beyond 4th September, 2007 and thus, it can be construed that parties were not in agreement for extension to the mandate of the Arbitrator failing which the arbitral proceedings automatically stood terminated.Sub-section(2) of Section 14 clearly stipulates that if a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), the party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate and the appellants rightly applied to the Court for termination of the mandate of the Arbitrator pursuant to the provisions of this Section and the Court was within its jurisdiction to decide accordingly.It is true that the object of the scheme of the Act, 1996 is to secure expeditious resolution of disputes and it is based on the fulcrum of promptitude but at the same time the Arbitrator is required to adjudicate the disputes in view of the agreed terms of contract and the procedure. Therefore, the arbitration proceedings are supposed to be governed and run by the terms as agreed by the parties. The Arbitrator, therefore, cannot go beyond the clause of the arbitration agreement. We all need to respect the legislative intent underlying the Act. The speedy and alternative resolution to the dispute thus cannot be overlooked but at the same time, proceedings have to be governed and run by the terms agreed between the parties in concluding the arbitral proceedings failing which it will frustrate the mandate of the object of the Act with which it has been legislated by the Parliament to act upon on agreed terms and conditions of the agreement in concluding the arbitral proceedings.In the instant case, from the pleadings on record and noticed by the High Court in its impugned judgment dated 14th March, 2008, the proceedings stood terminated as the appellants have not recorded their consent for extension of time which was the requirement and essence of the conditions of the agreement and the Arbitrator became de jure unable to perform his functions after the expiry of four months from the date of first preliminary meeting held on 4th May, 2007 but that was declined by the High Court on the premise that after the appellants have participated in the arbitral proceedings, that waived their right to question extension of time as it was inpracticable for the Arbitrator to conclude the proceedings within a period of four months and the High Court was of the view that the Act has been legislated with an object to facilitate an efficacious recourse to arbitration failing which it will be in grave peril.The essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The voluntary choice is the essence of waiver. There should exist an opportunity for choice between the relinquishment and an enforcement of the right in question. It cannot be held that there has been a waiver of valuable rights where the circumstances show that what was done was involuntary. That apart, the doctrine of ?waiver? or ?deemed waiver? or ?estoppel? is always based on facts and circumstances of each case, conduct of the parties in each case and as per the agreement entered into between the parties and this exposition has been affirmed by this Court in NBCC Ltd.(supra) regarding adherence to the imposition of time limit for the conclusion of the arbitral proceedings. The parties have to stand by the terms of contract including the Arbitrator.The clause so referred indicates that the parties have admittedly agreed and the time period so prescribed is final and binding. It means the arbitration proceedings should commence and end within the prescribed period of time which in the instant case was of four months and expired on 4 th September, 2007 and, there was no occasion for either party to raise an objection as long as the time was available at the command of the Arbitrator to conclude the arbitral proceedings and pass an award within the time schedule fixed under the terms of contract as agreed by the parties.That apart, there is no provision under the arbitration agreement to condone the delay when agreement between the 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.The time fixed for the arbitration and/or schedule of time limit in such arbitration proceedings, as it is recognised by law, there is no reason not to accept the same, basically in the present facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Act, 1996 also recognise this mechanism and after the expiry of four months period from the date of first preliminary meeting held on 4th May, 2007, the Arbitrator indeed becamede jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the partiesas prayed for stood terminated.e time fixed for the arbitration and/or schedule of time limit in such arbitration proceedings, as it is recognised by law, there is no reason not to accept the same, basically in the present facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Act, 1996 also recognise this mechanism and after the expiry of four months period from the date of first preliminary meeting held on 4th May, 2007, the Arbitrator indeed becamede jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the partiesas prayed for stood terminated.e time fixed for the arbitration and/or schedule of time limit in such arbitration proceedings, as it is recognised by law, there is no reason not to accept the same, basically in the present facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Act, 1996 also recognise this mechanism and after the expiry of four months period from the date of first preliminary meeting held on 4th May, 2007, the Arbitrator indeed becamede jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the partiesas prayed for stood terminated.