K.I.P.L. Vistacore Infra Projects J.V. v. Municipal Corporation of the city of Ichalkarnji

1. The Arbitration Petition fled by the Petitioner under Section 29-A of the Arbitration and Conciliation Act, 1996 (for short, “The Act”), seeks extension of time for completion of the pending arbitration proceedings, by a period of six months. The brief background facts reveal that the Urban Infrastructure Development Scheme for Small and Medium Towns Scheme (UIDSSMT) Mission was launched by the Government of India in the year 2012. Under the said scheme, the Municipal Corporation of city of Ichalkarnji, proposed construction of two decentralized Sewage Treatment Plants (STP) of 10+8 MLD capacity alongwith ancillary infrastructure such as pumping stations etc. The funding was sanctioned by the Government of India and the State of Maharashtra on the basis of the Detailed Project Report (DPR) submitted by the Respondents. Pursuant to the tender foated by the Respondent on 01/03/2021, the Petitioner’s bid, being the lowest one, was accepted and the Work Order was issued in it’s favour. By the year 2019, the Petitioner claimed to have completed 55% of work and the delay is attributed to the Respondent, as the possession of the land was handed over belatedly alongwith the drawings for STP.

2. The Petitioner was blacklisted by the Respondent and, hence, it approached this Court in a Writ Petition, which was withdrawn, as Respondent No.1 by its resolution extended the time for completion of the work, by a further period of six months. However, this resolution was stayed by the Collector and by the subsequent resolution passed by the Respondent, the contract of the Petitioner was terminated. The Petitioner once again fled Writ Petition (St) No.4077 of 2020, challenging the said termination and it was disposed off with a liberty to make representation. Another Writ Petition was fled vide Writ Petition (L) NO. 98777 of 2020, challenging the resolution passed by the Municipal Corporation in its general body meeting on being listed before the Division Bench on 22/01/2021, the Municipal Council Ichalkaranji informed the Court that it had passed a resolution dated 19/01/2021, to resolve the disputes between the parties by arbitration to be conducted through a retired District Judge. Upon such offer coming from the Municipal Council, the Petitioner agreed to withdraw it’s proceedings pending before the Urban Development Minister as well as the Petition. The Division Bench of this Court, therefore, appointed Shri Amol V. Deshpande, retired District Judge as an Arbitrator to decide rajshree the disputes between the parties by directing that arbitration shall be conducted at Kolhapur. The Arbitrator was also directed to make an endeavour to declare the Award within a period of six months from the date of the order.

3. The Arbitrator conducted a preliminary meeting on 08/02/2021 and the proceedings commenced before the Arbitrator. But, its progress was marred in the wake of the Covid pandemic. By consent of the parties, the mandate of the Tribunal was extended by six months and when it expired on 31/08/2023, an application is fled under Section 29-A of the Act, seeking extension of time to conclude the proceedings.

4. Mr. Godbole, the learned senior counsel has raised a preliminary objection about maintainability of the Petition before this Court, as according to him, Section 2 of the Act has defned the term “Court” under Section (2)(1)(e) of the Act. It is the contention of Mr. Godbole that Section 29-A, which was introduced by Act No.3 of 2016 w.e.f. 23/10/2015, has set out the time limit for passing of the Arbitral Award and by inviting my attention to sub-sections (4) to (6) of the said Section, his specifc submission is, the word “Court” used in this context must be read as “Court”, as defned under Section 2(1)(e) and there is no justifcation in the Petition approaching this Court, seeking extension of time and in this case, since the appointment of the Arbitrator is not under Section 11 of the Act. The learned senior counsel placed reliance upon the decision of the Apex Court in the case of State of West Bengal & Ors. Vs. Associated Contractors[1], where it is categorically held that the rajshree Court for the purposes of Section 2(1)(e) exhaustively means only Principal Civil Court of Original Jurisdiction in a district or High Court having original civil jurisdiction in the State, and if both have jurisdiction, then the provisions of the 1996 Act leave no room for any doubt that it is the superior most court exercising original jurisdiction, which has been chosen to adjudicate disputes arising out of the arbitration agreements. In reference to Section 42 of the Act, it is held that it is not applicable to applications not made before the “Court” as defned under Section 2(1)(e). Another decision on which, he has placed reliance is of the learned single Judge of the Bombay High Court in the case of Magnum Opus IT Consulting Private Limited Vs. Artcad Systems, through its Proprietor Vinay Digambar Shende[2] and he would submit that the learned single Judge has considered the conficting views as regards the jurisdiction of the District Court to extend the mandate or substitute the Arbitrator under Section 29-A of the Act and ultimately, derived a conclusion that when the Arbitrator is neither appointed under Section 11 of the Act nor substituted by the Court, and the question arose whether the District Court Nashik, the Principal Civil Court of original jurisdiction in the District, shall exercise the power under Section 29-A and answering the same in the affrmative, it is conclusively held that in the context of the matter interpreting the word “Court” to mean Principal Civil Court of Original Jurisdiction does not lead to an anomalous situation and do not give rise to confict of powers and there is no scope to depart from the normal rule of giving effect to the meaning of the term “Court” as defned in the Act.

5. Per contra, the learned counsel Mr.Akshay Patil, responding to the objection raised by Mr.Godbole, has taken me through the rajshree scheme of the statute i.e. the Arbitration and Conciliation Act, 1996 and he would urge that Section 2 of the Act of 1996, opens with the words, “In this Part, unless the context otherwise requires,-”. He would thus submit that the defnition of the term “Court” under Section 2(1)(e) shall be read, as provided therein, unless the context otherwise requires and he would invoke the principle of statutory interpretation, which is well settled, that interpretation must depend on the text and the context and that interpretation is best, which makes the textual interpretation match the contextual. According to him, the statute must be looked at as a whole and it must be discovered what each Section, each clause, each phrase and each word is meant and designed to say as to ft into the scheme of the entire Act and in interpreting a particular provision or word used by the legislation in the legislative scheme, the defnite meaning has to be assigned to the same. Further, by inviting my attention to Section 11, which contemplate a scheme formulated by the Chief Justice of the High Court and the Supreme Court for the purposes of appointment of an Arbitrator, either in domestic arbitrations or in an international arbitrations, Mr.Patil urges that it is an inconceivable argument that an Arbitrator is appointed by the High Court, but his substitution, is by a Court subordinate to it and for that matter, even a Court contemplated under Section 2(1)(e) i.e. Principal Civil Court of original jurisdiction in a district. According to him, if Section 29-A has to be dissected, it would cover two distinct acts; the frst being extension of mandate of the Arbitrator, if the Award is not made within the period specifed in sub-section (1) of Section 29-A and the second part is, being the power to substitute one or all of the Arbitrators, while extending the period referred to in subsection (4), as contemplated under sub-section (6) of Section 29-A. He would specifcally assert that it is highly unfathomable rajshree that at the frst instance the Arbitrator is appointed under the scheme contemplated under Section 11 of the Act, but when it comes to substitution, the Court as understood in Section 2(1)(e) shall substitute the Arbitrator and continue the arbitral proceedings.

6. Mr. Patil has placed reliance upon the decision of this Court in the case of Cabra Instalaciones Y. Servicios, S.A. Vs. Maharashtra State Electricity Distribution Company Limited[3], when the learned single Judge while dealing with the very same issue in relation to an international arbitration, has propounded upon the statutory provision in form of Section 29-A and it to be a substantive and comprehensive provision, and more particularly, in view of clear provision of sub-section (6) which provides that while extending the period referred to in sub-section (4), it would be open to the Court to substitute one or all the Arbtirators, in International Arbitration and certainly the High Court exercising the power under Section 29- A cannot make an appointment of a substitute Arbitral Tribunal or any member of the Arbitral Tribunal, as it would be the exclusive power and jurisdiction of the Supreme Court, considering the provision of Section 11(5) read with Section 11(9) and also Sections 14 and 15 of the Act. Another decision which is relied upon by Mr. Patil is of the Delhi High Court in the case of DDA Vs. Tara Chand Sumit Construction Co.4, where the learned single Judge of the Delhi High Court, has arrived at a same conclusion and found fortifed by the judgment of the Gujarat High Court in the case of Nilesh Ramanbhai Patel Vs. Bhanubhai Ramanbhai Patel[5]. Reliance is also placed upon the decision of the Calcutta High Court in the case of Amit Kumar Gupta Vs. Dipak Prasad[6], which

5 Misc.Civl Application (O.J) No.1 of 18 rajshree has followed the decisions in Cabra Instalaciones Y. Servicios, S.A. (supra) of the Bombay High Court, in Nilesh Ramanbhai Patel (supra) of the Gujarat High Court and in Tara Chand Sumit Construction Co. (supra) of the Delhi High Court. The above decisions, according to Mr.Patil, have sealed the position of law that the power under Section 29-A shall be exercised only by the High Court in case of domestic arbitration and by the Supreme Court in the international arbitration and use of the word “Court” shall be read in contextual sense rather than textual sense to mean what is defned under Section 2(1)(e).

7. The issue that falls for consideration in the light of the rival contentions advanced on behalf of the Petitioner and Respondent is the import of the word ‘Court’ used in Sub-Section(4), of Section 29A which prescribe that if the Award is not made within the period prescribed under Sub-section (1) of Section 29A or the extended period, then the mandate of the Arbitrator shall terminate unless the Court has, either prior to, or after the expiry of the period so specifed, extended the period. In the given facts of the present case the question that arises is whether it should be the High Court which shall be competent to grant the extension or by considering the term ‘Court’ as defned in Section 2(1)(e), or whether it shall be Principal Civil Court of Original Jurisdiction in Pune. It is, therefore, necessary to consider, the meaning assigned to the term ‘Court’ for the purposes of Act of 1996 and Section 2 has defned the term ‘Court’ as under:- (2)(1)(e) “Court” means-

(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter rajshree of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of Courts subordinate to that High Court.” The reading of the aforesaid defnition would clearly indicate that in case of domestic arbitration, ‘Court’ means, the Principal Civil Court of Original Jurisdiction in a district and includes the High Court which exercises its ordinary original civil jurisdiction, which has jurisdiction to decide the questions forming a subject matter of the arbitration, if the same had been the subject matter of Suit. However, in case of international commercial arbitration, the ‘Court’ is the Supreme Court in exercise of its ordinary original civil jurisdiction and in other cases a High Court having jurisdiction to hear the Appeals from the decree of that Court, being subordinate to that Court. It is to be noted that while defning the term ‘Court’ in Section 2, it is preceded by the wording of sub-Section (1) of Section of Section 2 by the following words, “In this Part, unless the context otherwise requires,” In the scheme of the Act of 1996 which provides for composition of the Arbitral Tribunal, Section 11 prescribe for the appointment of Arbitrators and subject to Sub-Section (6), the parties are free to agree on a procedure for appointing the Arbitrator(s). Failing an agreement between the parties as to the procedure for appointment, Sub Section (3) steps in, setting out the manner in which the Arbitral Tribunal shall be constituted. Sub-Section 3-A of Section 11 empowers the Supreme Court and High Court to have the power to designate arbitral institutions rajshree for the purpose of the Act and where no such institutions are available, the Chief Justice of the concerned High Court shall maintain a panel of Arbitrators and appoint an Arbitrator who shall be entitled to the fees as set out in the Fourth Schedule. Sub-Section (4) and Sub-Section (5) of Section 11 offers a solution to a situation when there is no adherence to the procedure prescribed in Sub-Section (2) or the one contemplated under Sub- Sub-Section (6) is one more situation where under appointment procedure agreed upon by the parties, a party fail to act as required under that procedure or the appointed Arbitrators fail to reach an agreement expected of them under the procedure or a person including an institution fails to discharge the function entrusted to him or it under the procedure and in such a situation on an application made by the party, the appointment shall be made in case of international commercial arbitration by the arbitral institution designated by the Supreme Court or by the High Court in case of Arbitration other than International Commercial Arbitration.

8. Thus, the manner of appointment of the Arbitrator/(s) is prescribed under Section 11 and it would be anomalous to construe that once an Arbitrator is appointed by the High Court or the Supreme Court in case of International Commercial Arbitration, the extension of the mandate of the arbitral tribunal under Section 29-A shall be left to the Court in terms of Section 2(1)(e), to mean a Principal Civil Court of original jurisdiction in a district and Mr. Godbole has pitched his argument to a higher gradient, by submitting that even if the appointment of an Arbitrator is under Section 11 of the Act, the extension of time under Section 29-A is permissible by the Principal Civil Court of original jurisdiction in a district and in the present case, the Principal District Judge, Pune rajshree as if a Suit was to be fled by the Petitioner/Claimant for the relief sought through the claim, the Suit would lie to the Court in Pune.

9. Mr. Godbole has argued that this is not a case where the appointment of the Arbitrator is by the High Court in exercise of its power under Sub-Section (6) of Section 11 and it is on the Municipal Council, Ichalkaranji, passing a resolution for resolving the disputes through arbitration, a statement to that effect was made before the High Court in a Writ Petition fled by the Petitioner/ Claimant and in the wake of the said statement, the Petitioner withdrew the Petition as well as his Application which was pending before the Minister. As a consequence of the order dated 22.01.2022, which is not strictly an appointment of an Arbitrator under Sub-Section 6 of Section 11, it is his submission that there is no reason why the term ‘Court’ as defned in Section 2(1)(e) shall not assign its literal meaning and be construed as the Principal Civil Court of Original Jurisdiction in Pune. The argument of Mr. Godbole, in my considered opinion do not hold good for the simple reason that the order dated 22.01.2022 though recorded the statement advanced on behalf of the Municipal Council, Ichalkaranji, to have their disputes resolved through Arbitration, it is the High Court which stepped in and appointed an Arbitrator with a direction to fle a disclosure statement and further directions being issued to the Arbitrator to make an Award within a period of six months. The cost of the Arbitrator was also determined by the High Court and merely because the appointment was not under Sub- Section (6) of Section 11, in my opinion it is open to infer that though the appointment of the Arbitrator is by the High Court, the extension of his mandate shall be by a Court of Principal District Judge in Pune. rajshree

10. In Cabra Instalaciones Y. Services vs. Maharashra State Electricity Distribution Company Limited, 2019 SCC OnLine Bom 1437, the learned Single Judge, who had an opportunity to determine the scope of Section 29-A of the Act of 1996 with reference to an international commercial arbitration where the arbitral tribunal was constituted by an order passed under Section 11(5) of the Act by the Supreme Court, specifcally observed as under by concluding that the High Court exercising power under Section 29A cannot make an appointment of a substitute arbitral tribunal or any member of the arbitral tribunal as it would be the exclusive power and jurisdiction of the Supreme Court considering the provisions of Section 11(5) read with Section 11(9) and also Section 14 and 15 of the Act. The relevant observations by Justice G.S. Kulkarni, touching the above aspect is relevant and deserve reproduction:- “7. On a plain reading of Section 29A alongwith its sub-sections, it can be seen that for seeking extension of the mandate of an arbitral tribunal, these are substantive powers which are conferred on the Court and more particularly in view of the clear provisions of sub-section (6) which provides that while extending the period referred to in sub- section (4), it would be open to the Court to substitute one or all the arbitrators, which is in fact a power to make appointment of a new/substitute arbitrator or any member of the arbitral tribunal. Thus certainly when the arbitration in question is an international commercial arbitration as defned under Section 2(1)(f) of the Act, the High Court exercising power under Section 29A, cannot make an appointment of a substitute arbitral tribunal or any member of the arbitral tribunal as prescribed under sub-section (6) of Section 29-A, as it would be the exclusive power and jurisdiction of the Supreme Court considering the provisions of Section 11(5) read with Section 11(9) as also Sections 14 and 15 of the Act. It also cannot be overlooked that in a given case there is likelihood of an opposition to an extension application and the opposing party may pray for appointment of a substitute arbitral tribunal, requiring the Court to exercise powers under sub-section (6) of Section 29-A. In such a situation while appointing a substitute arbitral tribunal, rajshree when the arbitration is an international commercial arbitration, Section 11(9) would certainly come into play, which confers exclusive jurisdiction on the Supreme Court to appoint an arbitral tribunal.

8. Thus, as in the present case once the arbitral tribunal was appointed by the Supreme Court exercising powers under Section 11(5) read with Section 11(9) of the Act, in my opinion, this Court lacks jurisdiction to pass any orders under Section 29-A of the Act, considering the statutory scheme of Section 29-A. It would only be the jurisdiction of the Supreme Court to pass orders on such application of any of the parties al suffcient cause and on such terms and conditions as may be impo by the Court. Sub-section (6) is of signifcance which provides that while extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrators so appointed under Section 29A would be deemed to have received the said evidence and material. Sub-section (7) provides that in the event of an arbitrator(s) being appointed under Section 29A, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.”

11. The aforesaid fnding is followed by Delhi High Court in case of DDA vs. Tara Chand Sumit Construction Co. (supra) when a controversy arose whether the power to extend the mandate of the Arbitrator lies with the Civil Court of Original Jurisdiction in terms of the defnition of ‘Court’ in Section 2(1)(e) when the Application was fled under Section 29A for extension of the mandate of the Arbitrator and the inescapable conclusion drawn, is the term ‘Court’ in Section 29A would be the High Court in case of domestic arbitration which has exclusive power to appoint an Arbitrator and not the District Court as per Section 2(1)(e) of the Act. In the Judgment, Justice Jyoti Singh of the Delhi High Court has essentially captured the essence of Section 29A, a provision which confers the power upon the Court of substituting one or of all Arbitrators while extending the mandate of the Arbitrator under rajshree Sub-Section (4), if the need arises, and in case, such substitution is made by the Court, then the arbitral proceedings, shall continue from he stage already reached on the basis of the evidence and material already collected. In para 26 and 27 the relevant observations are to be found, which read to the following effect:- “26. When one looks at the defnition of the term 'Court' under Section 2(1)(e) of the Act, it is clear that in case of International Commercial Arbitration, the Court would mean the High Court, in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of the sui or the High Court having jurisdiction to hear appeals of Courts subordinate to that High Court. However, in cases of arbitration other than International Commercial Arbitration, Court would be the Principal Civil Court of original jurisdiction in a District and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide questions forming subject matter of the arbitration if the same had been the subject matter of the suit. This defnition has been substituted by way of the Amendment Act 3 of 2016, which came into effect from 23.10.2015.