Bharat Petroleum Corporation Limited v. Punj Lloyd Ltd.

16. Learned Sole Arbitral Tribunal vide its order dated 04.01.2024 inter alia held that since the dispute in the present matter arose in 2013 and the matter was referred to arbitration by this court on 04.07.2013 the Pre-Amendment Act being the law enforced at that time shall apply to the present arbitration proceedings.

17. Learned Sole Arbitrator after taking into account Clause 19(a) and Clause 19(b) of the Contract inter alia held that the conjoint reading of Clause 19(a) and Clause 19(b) of the Contract reveals that the mandate of the Arbitrator was to expire after the completion of two years from the date of entering upon the reference by the Arbitrator originally appointed.

18. It was further inter alia held that as far as the proceedings before the arbitrator subsequently appointed are concerned, Clause 19(a) unambiguously states that the arbitrator subsequently appointed shall proceed with the reference from the point at which it was left by the predecessor.

19. Learned Sole Arbitrator finally concluded that the petitioner had failed to raise an objection regarding the jurisdiction of the present tribunal within the prescribed timeline, despite having ample opportunity and had voluntarily and knowingly participated in the arbitration proceedings across a span of eight years thereby, waiving its right to raise the said objection at this stage.

B. SUBMISSIONS OF PETITIONER

20. Mr. Raj Shekhar Rao, learned senior counsel for the petitioner submitted that Clause 19 of the MOA (Memorandum of Agreement) dated 14.07.2011 stipulates that the award shall be published by the arbitrator within two years after entering upon reference. It has been submitted that Clause 91(b) of the GCC provides that the award shall be in writing and published by the arbitrator within two years after entering upon the reference or within such extended time not exceeding further twelve months as the sole arbitrator shall be writing under his own hands appoint.

21. Learned senior counsel further submitted that in the present case notice of preliminary hearing was issued on 08.06.2017 and 2 years period mandated under the Contract expired on 07.06.2019. It has been submitted that therefore the learned Sole Arbitrator does not have jurisdiction to continue with the arbitration proceedings on account of the time limit provided in 19 (b) of MOA or Clause 91(b) of the General Conditions of Contract.

22. Learned senior counsel submitted that in Jayesh H. Pandya vs. Subhtex India Limited (2020) 17 SCC 383 it was interalia held that if the agreement specifies a time limit for passing an arbitral award (even under the unamended Act), the arbitrator is bound by such a provision.

23. Learned senior counsel also submitted that the Arbitral Tribunal is a creature of contract, and the provisions of the contract are binding on it. Learned counsel submits that if there is such a stipulation in the contract even courts cannot extend the mandate.

24. Learned senior counsel further submitted that in case any of the eventualities mentioned in Section 14(1)(a) of the Arbitration and Conciliation Act, 1996 when 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 the aggrieved party has to approach the court concerned as defined under Section 2(1)(e) of the 1996 Act. Learned senior counsel submits that thus this court has to adjudicate on whether, in fact, the sole arbitrator has become de jure and/or de facto unable to perform his functions.

25. It has been also submitted that the learned Sole Arbitrator misread and misconstrued the terms of Clause 19(a) and selectively quoted Contract clauses without quoting the entire provision.

C. SUBMISSIONS OF RESPONDENT

26. Learned counsel for the respondent submitted that the learned Arbitrator has passed a reasoned order on the correct interpretation of arbitration Clause 19 and there is no infirmity and the present petition under Section 14 is liable to be rejected.

27. Learned counsel for the respondent submitted that the matter was adjourned sine die by the Order dated 09.04.2019 and the application seeking revival of the arbitration was filed by the Respondent on 26.09.2023. It has been submitted that the delay in filing the application was duly explained.

28. Learned counsel further submitted that the terms of Clause 19 (a) of the Contract show that the intention was to bind either the Director, Marketing or the employee of Petitioner who would have acted as the Sole Arbitrator. It has been submitted that the present Ld. Arbitrator, who is not an employee of the Petitioner, is therefore not bound by the terms of Clause 19 of the Contract. Learned counsel also submitted that in the Preliminary hearing procedural order dated 28.06.2017, the parties gave their consent that further procedure in the matter would be decided by the learned Sole Arbitrator. It has further been submitted that the parties had consciously with consent deviated from the terms of the Contract and now Petitioner cannot selectively choose to belatedly fall back upon the same terms to the prejudice of the Respondent/Claimant.

29. Learned counsel for the respondent submitted that the learned Sole Arbitrator has rightly held that the present proceeding is governed by the old Arbitration & Conciliation Act, 1996 which did not provide any timeline for the completion of arbitration proceedings or for passing of award by the Arbitral Tribunal.

30. Learned counsel submitted that the petitioner continued to participate in the arbitration proceedings and by its conduct waived off the applicability of Clause 19 (b) of the Contract in terms of Section 4 of the Arbitration and Conciliation Act 1996.

31. Learned counsel for the respondent further submitted that If it is the case of the Petitioner the present Ld. Arbitrator should have passed the Award within two years from the date of his appointment i.e., 03.05.2017 as on 09.04.2019 i.e., when the matter was adjourned, at that stage the arbitration proceedings were at the stage of recording evidence; the cross-examination of RW-1 was scheduled to commence and by no stretch of imagination the recording of evidence and arguments in the matter would have been concluded between the period 09.04.2019 and 03.05.2019 for the present Ld. Arbitrator to pass the arbitral award before 03.05.2019. Despite the same, the Petitioner did not bring to the attention of the present Ld. Arbitrator or the Respondent that in terms of Clause 19 (b) of the Contract, the mandate of the present Hon'ble Tribunal was allegedly about to expire on 03.05.2019.

32. Learned counsel for the respondent also submitted that the above fact is also pertinent to be noted in the context of the Order dated 09.04.2019 passed by the present Ld. Arbitrator when parties were directed "to inform the Tribunal as soon as it would be legally possible to hear the matter". If it was legally not possible to proceed with the matter, the Petitioner ought to have informed the Ld. Tribunal. In the absence thereof, the Petitioner is deemed to have waived off its right to now belatedly object and is therefore estopped from doing so. Even the Respondent through its email dated 08.04.2019 had merely requested for a simple adjournment in view of the initiation of CIRP against the Respondent Company.

33. Learned counsel submitted that the reliance placed by the petitioner upon Jayesh H. Pandya vs Subhtex (India) Ltd., (Supra) is misconceived as the facts in those cases were totally different. It was further submitted that the reliance placed on N.B.C.C. Ltd. vs. J.G. Engineering Pvt. Ltd. (2010) 2 SCC 385 is also not correct as the arbitrator therein had exceeded the time in passing the arbitral award provided to him by the Hon‟ble High Court, as well as the time limit that was extended with the mutual consent of the parties, without assigning any reasons for the same.

34. Learned counsel further submitted that in the case of India Media Services Pvt. Ltd. vs. SBPL Infrastructure Limited, MANU/WB/1871/2023, the issue before the Hon‟ble High Court of Calcutta, was the validity of an arbitral award that was passed after the alleged expiry of the time limit within which the award had to be passed by the Arbitral Tribunal, as was envisaged in the relevant contract clause therein. The Hon‟ble Court in this case categorically noted that the arbitration proceedings pertained to the unamended/old Arbitration and Conciliation Act 1996 (pre-2015 amendment) which did not provide any time for making or publishing the Award. The Court relied upon the case of Efcalon The-Up Private Limited vs Startrack Agency Pvt. Ltd. in G.A No. 2524 of 2017 arising out of AP No. 595 of 2016, wherein it was held that when the arbitration proceedings had commenced prior to the coming into force of the amended Arbitration and Conciliation Act, 1996 (i.e., post-2015 amendment) the Arbitrator need not have to think about any time limit to conclude the reference. It is reiterated that the present arbitration proceedings had also commenced under the un-amended Arbitration and Conciliation Act 1996, and the same finds duly recorded in the Order dated 28.06.2017 passed by the present Ld. Arbitrator and agreed by the Petitioner. Therefore, the question of the time limit within which the award had to be published by the present Ld. Arbitrator does not arise in the present case.

35. Learned counsel further submitted that Sections 12, 13 and 14 of the Act are the trinity provisions constituting a composite statutory scheme dealing with the subject of the challenge to an arbitrator and termination of the mandate. The said sections evidently construct separate causeways for a challenge that may be laid. It is submitted that to invoke Section 14 of the Act, the objecting party has to show that the arbitrator has become de jure unable or de facto unable to perform his functions or for other reasons fails to act without undue delay. When an arbitrator is appointed contrary to Section 12(5) read with the Seventh Schedule of the Act, he becomes ineligible to perform his functions and the mandate of such an arbitrator can be terminated by the Court under Section 14 of the Act. However, this is not at all the case of the Petitioner herein.

36. Learned counsel further submitted that the present petition is liable to be rejected and this objection can only be taken in a petition under Section 34 of the Arbitration and Conciliation Act.

37. Learned counsel submitted that in the interest of the justice may consider extending the mandate of the Ld. Arbitrator under Section 29A of the Act.

D. FINDING AND ANALYSIS

38. The Arbitration Laws have been amended from time to time to consolidate the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the model law and conciliation rules adopted by the United Nations Commission on International Trade Law.

39. The basic intention of the legislature behind these enactments is to strengthen the alternative dispute resolution system and to ensure that commercial matters are settled on the basis of the agreement between the parties in an expeditious manner. The purpose is to make the arbitral procedure fair, efficient and capable of meeting the needs of the specific arbitration. The legislature and the judgments of the Constitutional Courts from time to time have also emphasised upon minimizing the supervisory role of courts in the arbitral process.

40. The arbitration agreement in Section 2(b) has been defined to mean an agreement referred to in Section 7. Section 7 of the Arbitration Agreement provides as under: Arbitration Agreement__ (1)In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in— _ (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication 1[including communication through electronic means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

41. Thus the arbitrator is a creature of an agreement as entered into between the parties as defined under Section 7 of the Arbitration and Conciliation Act.

42. Section 8 of the Arbitration and Conciliation Act also makes it clear that if there is an arbitration agreement between the parties the judicial authority subject to the conditions mentioned therein shall refer the parties to arbitration. The court‟s judicial authority can refuse to refer to the arbitration unless it finds that prima facie no valid arbitration agreement exists.

43. Section 11 of the Arbitration and Conciliation Act provides a detailed procedure for the appointment of an arbitrator. The cumulative reading of the provisions in the Arbitration and Conciliation Act makes it clear that the arbitrator is a creature of an agreement between the parties and therefore the stipulations contained in the agreement shall always remain paramount and binding upon the parties. The only exception is as contained in Section 4 of the Arbitration and Conciliation Act, 1996 which reads as under: Waiver of right to object A party who knows that— _ (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such noncompliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.

44. However, for such a waiver, it is a settled proposition that it must be a voluntary and intentional relinquishment of a right. This would also based on the facts and circumstances of each case. Thus in order to infer the waiver on the part of a party to the agreement there has to be strong grounds that there was a voluntary and intentional relinquishment of a right.

45. Before proceeding further it is necessary to go through the relevant clauses of the MOA dated 14.07.2011 and Clause 91(b) of the GCC. Clause 19(a) of the MOA is as under”

46. The basic contention of the learned counsel for the petitioner is that Clause 91(b) provides unambiguously that the award shall be made in writing and published by the Arbitrator within two years after entering upon the reference. The only window available is an extension for a further twelve months. Further, Clause 91(b) further provides that the consent for the further period of a further twelve months shall be deemed to have irrevocable been given by the parties.

47. In Jayesh H. Pandya vs. Subhtex India Limited (supra) it was inter alia held as under:

48. Even at the cost of reptition, certain dates are important.

49. After adjourning the arbitration on sine die on 09.04.2019 the petitioner objected to the revival of the arbitration proceedings. On 04.01.2024 learned Sole Arbitrator allowed the respondent‟s request for revival of the arbitration proceedings.

50. The conjoint reading of Clause 91(a) of MOA and Clause 91(b) of the GCC makes it clear that it was agreed upon between the parties that the award shall be made in writing and published by the Arbitrator within two years after entering upon the reference which was further extendable to 12 months.

51. It is a matter of record that none of the previous arbitrators completed two years. In these circumstances, there were no possibility for the petitioner to have raised the objection for termination of the proceedings. In respect to the non-maintainability of the present petition, In Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal & Ors, etc., etc. 2022 10 SCC 235 which inter alia held as under:

21. Therefore, on a conjoint reading of Sections 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 1996 Act 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 “court” concerned as defined under Section 2(1)(e) of the 1996 Act. The court concerned 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 court concerned as provided under Section 14(2) of the 1996 Act.

22. 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 court concerned. 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 “court” concerned only and after the decision by the “court” concerned as defined under Section 2(1)(e) of the 1996 Act 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.

52. The present learned Sole Arbitrator entered into reference on 03.05.2017 which was continued till 03.05.2019. Even if we exclude the period from 08.03.2019 to 27.05.2022 (the period of moratorium) the learned Sole Arbitrator as per the agreement could have de jure held the proceedings till 27.08.2022 and thereafter, if further extended period of twelve months is taken into account the mandate was only upto 27.08.2023.

53. In terms of the stipulation of the award the learned Arbitrator was supposed to conclude and pass the award within the period prescribed in the agreement. The contention of the learned counsel for the respondent that the petitioner could not have taken this matter under Section 14(1)(a) is also not sustainable in the eyes of the law, in view of the findings in Swadesh Kumar Aggarwal (Supra) Section 14(1)(a) specifically confers the jurisdiction upon the court to terminate the mandate of an arbitrator if he becomes de jure and/or de facto unable to perform his function.

54. It is not disputed that the present court falls within the definition of “Court” as defined in Section 2(1)(e) of the Arbitration and Conciliation Act. It cannot be forgotten that the purpose and object of the act is to secure expeditious resolution of disputes. The learned Arbitrator under the Act is required to adjudicate the dispute in view of the agreed terms of the contract. The parties are bound to be governed by the same. The waiver as defined under Section 4 can only be resorted to if it is a voluntary and intentional relinquishment.

55. Without adverting to the order passed by the learned Sole Arbitrator dated 04.01.2024. This court is of the considered view that in view of the Clause 91(a) of the MOA and Clause 91(b) of GCC the mandate of the learned Sole Arbitrator stands expired. Hence the present petition is allowed. i) The disputes between the parties under the said agreement are referred to the arbitral tribunal. ii) Justice Anil R. Dave, former Judge, of Hon‟ble Supreme Court of India is substituted as the Sole Arbitrator. Learned Sole Arbitrator shall conduct the proceedings in accordance with the terms of the agreement between the parties. iii) The remuneration of the learned Arbitrator shall be in terms of fee rules of the DIAC Schedule or as the parties may agree. iv) The learned Arbitrator is requested to furnish a declaration in terms of Section 12 of the Act prior to entering into the reference. v) It is made clear that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection, as well as claims on merits of the dispute of either of the parties, are left open for adjudication by the learned arbitrator. vi) The parties shall approach the learned arbitrator within two weeks from today.

56. In view of the above, the present petition along with pending application stands disposed of.

DINESH KUMAR SHARMA, J MARCH 13, 2024/AR/AK