Full Text
HIGH COURT OF DELHI
Date of Decision: 7th March, 2022
TIMES INTERNET LIMITED ..... Petitioner
Through: Mr. Kunal Tandon and Mr. Shashank Shekhar, Advocates.
Through: Mr. P.K. Bansal, Advocate.
JUDGMENT
SANJEEV NARULA, J. (Oral):
1. The present petition has been filed under Section 14 and 15 of the Arbitration and Conciliation Act, 1996 [hereinafter, “the Act”] by the Petitioner – Times Internet Limited [hereinafter, “TIMES”] against the Respondent – Bharat Sanchar Nigam Limited [hereinafter, “BSNL”] seeking termination of mandate of the Arbitral Tribunal and appointment of a Substitute Arbitrator.
2. Before adverting to the contentions of the parties, a brief narration of facts is necessary, which is summarised as follows:
2.1. On 28th January, 2013 the parties entered into an Agreement 2022:DHC:1041 wherein TIMES was to provide ‘Voice-Based Value Added Services through Interactive Voice Response (“IVR”) or Human Assisted Platform to the GSM/ CDMA/ PSTN Subscribers of BSNL’ [hereinafter, “the Agreement”] to BSNL on non-exclusive cost of content/ services, on revenue sharing basis.
2.2. When disputes arose between the parties, on 21st January, 2016, TIMES invoked the arbitration clause of the Agreement, which reads as follows:
11. Dispute Settlement 11.[1] In the event of any question, dispute or difference arising under this agreement or in connection there-with (except as to the matters, the decision to which is specifically provided wider this agreement), the same shall be referred to the sole arbitration of the CMD, BSNL, New Delhi. In case his/her designation is changed or his/her office is abolished, then to the sole arbitration of the officer for the time being entrusted (whether in addition to his own duties or otherwise) with the functions of the CMD, BSNL. By whatever designation such an officer may be called (hereinafter referred to as the said officer) If the CMD, BSNL or the said officer is unable or unwilling to act as such, then to the sole arbitration of some other person appointed by the CMD, BSNL or the said officer. The agreement to appoint an arbitrator will be in accordance with the Arbitration and Conciliation Act 1996. There will be no objection to any such appointment on the ground that the arbitrator is a BSNL Servant or that he/she has to deal with the matter to which the agreement relates or that in the course of his/her duties as a BSNL servant he/she has expressed his/her views on all or any of the matters in dispute. The award of the arbitrator shall be final and binding on both the parties to the agreement. In the event of such an arbitrator to whom the matter is originally referred, being transferred or vacating his/her office or being unable to act for any reason whatsoever, the CMD, BSNL. or the said officer shall appoint another person to act as an arbitrator in accordance with terms of the agreement and the person so appointed shall be entitled to proceed from the stage at which it was left by his/her predecessors. 11.[2] The arbitrator may from time to time with the consent of both the parties enlarge the time frame for making and publishing the award. Subject to the aforesaid, Arbitration and Conciliation Act, 1996 and the rules made there under, any modification thereof for the time being in force shall be deemed to apply to the arbitration proceeding under this clause. 11.[3] The venue of the arbitration proceeding shall be the office of the CMD, BSNL, New Delhi or such other places within the area of operation as the arbitrator may decide.” [Emphasis Supplied]
2.3. Exercising their contractual right, BSNL appointed Shri. Roop Narayan Bhardwaj, Former CGMT, DOT/ MOC & IT, as the Sole Arbitrator [hereinafter, “First Arbitrator”].
2.4. On 25th April, 2016, TIMES filed its statement of claim and an application under Section 17 of the Act. The said application was disposed of vide order dated 22nd June, 2016, wherein BSNL was restrained from encashing the bank guarantee of Rs. 40 Lakhs furnished by TIMES. The First Arbitrator also made certain observations with respect to the arbitration clause, holding the same to be illegal, invalid, unconstitutional and inconsistent with the legal framework.
2.5. Aggrieved with the observations made in the afore-noted order passed by the First Arbitrator, TIMES approached this Court, preferring an appeal under Section 37 of the Act.[1] During the course of proceedings, on 18th January, 2017, Mr. P.K. Bansal, counsel for BSNL, informed the Court that Shri. T.N. Tiwari, former Additional Secretary, Ministry of Law & Justice, Department of Legal Affairs India – would be appointed as the Sole Arbitrator. The Court took note of this fact and directed the parties to appear before him and continued the order dated 22nd June, 2016. At the same time, the encashment of the bank guarantee was also stayed.
2.6. Subsequently, on 7th February, 2017, BSNL issued a formal order for appointment of Shri. T.N. Tiwari as Arbitrator [hereinafter, “Second Arbitrator”], observing that the proceedings shall be conducted de novo, as under: “Whereas in terms of Delhi High Court Order dated 18-01-2017. I, Anupam Srivastava, Chairman & Managing Director of BSNL hereby appoint Shri T.N. Tiwari, former Addl. Secretary, Ministry of Law & Justice, Department of Legal Affairs Govt. Of India as an sole Arbitrator to decide the said matter to settle the dispute on existing fee structure of BSNL for Arbitrator. Proceedings of arbitration will start de novo before him.”
2.7. TIMES vide communication dated 16th February, 2017, stated that proceedings before the Second Arbitrator should continue from the stage it had been left-off by the First Arbitrator – since only his mandate had been terminated, and not the proceedings itself. On the other hand, BSNL contended vide reply dated 23rd March, 2017, that proceedings must commence de novo, since the timelines and Being ARB. A (COMM) 34/2016. directions of the First Arbitrator had become invalid, after intervention by the Court. That said, notably there is no final view taken by the Second Arbitrator on this issue. Further, since then, there is no record of any arbitral proceedings.
2.8. Nonetheless, before filing of the present petition, TIMES sent a communication to the Second Arbitrator dated 28th July, 2020, stating that his mandate stands terminated in view of the law as explained by the Supreme Court in Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd..[2] There is no response from the Second Arbitrator to the said communication as well.
CONTENTIONS OF THE PARTIES
3. Mr. Kunal Tandon, counsel for TIMES, submits that TIMES cannot be left remediless. The bank guarantee in question – which is the crux of the dispute between the parties – has been continuously kept alive pursuant to interim orders passed by the Second Arbitrator.
TIMES should therefore, have an avenue for adjudication of its disputes with BSNL. Since the Arbitral Tribunal has not held any proceedings since 2017, this Court may appoint a Substitute Arbitrator. Mr. Tandon further submits that since the Tribunal appointed by BSNL is in conflict with the judgment of the Supreme Court in Perkins Eastman (supra), the Second Arbitrator de jure could not discharge his functions as an Arbitrator, and therefore, the only remedy available to TIMES is to seek appointment of a Substitute Arbitrator under Section 14 and 15 of the Act. Mr. Tandon also explains the delay in filing the application. He submits that with no response from the Second Arbitrator, settlement talks parallelly commenced inter se the parties. BSNL preferred an application dated 14th September, 2019 before the National Lok Adalat to settle the matter. However, when TIMES appeared before the said Authority, they were referred to the Central Office of BSNL. Since parties indulged in settlement talks with each other, no concrete steps were taken in arbitration. That said, the bank guarantee in question continued to be extended from time to time, and as such, is still valid as on date.
4. On the other hand, Mr. P.K. Bansal objects to the maintainability of the present petition on the grounds viz.
(i) that the arbitration agreement has become inoperative due to abandonment/ waiver/ renunciation/ election/ acquiescence/ act of omission or commission on the part of the parties etc. and (ii) of gross delay and latches and also as no “sufficient cause” has been shown for condonation of delay.
5. Mr. Bansal submits that the arbitral proceedings have to adhere to timelines provided under the Act. The proceedings commenced from 21st January, 2016, when TIMES invoked arbitration. The Arbitral Tribunal stood appointed in sometime in February, 2016, and therefore, the proceedings ought to have been completed within a period of one year from the date of the appointment. Notwithstanding the fact that Second Arbitrator was appointed subsequently, timelines contemplated Section 29A(1) of the Act would nonetheless apply. Therefore, once the mandate of the Second Arbitrator had expired by the efflux of time, TIMES ought to have approached this Court within reasonable time seeking extension or appointment of a Substitute Arbitrator. Mr. Bansal further submits that the cause of action pleaded in the instant petition reveals no ‘sufficient cause’ to justify the belted application. The plea of settlement talks is only an excuse to justify the gross delay in filing the instant petition – which cannot be overturned by such plea. In support of the same, reliance is placed on the judgment of the Supreme Court in Government of Maharashtra (Water Resources Department) v. M/s. Borse Brothers Engineers & Contractors Pvt. Ltd.[3] To further buttress his contention, he also places reliance upon the judgments in Czech Ocean Shipping v. M.M.T.C.,[4] Union of India v. M/s. Auto Pins (India) P. Ltd.[5] and Union of India v. Som Nath Chadha & Co.[6]
6. In rejoinder, on the question of limitation and ‘sufficient cause’ not being shown, Mr. Tandon argues that the Second Arbitrator appointed during the course of the appeal proceedings – constitutes a fresh appointment, following which, proceedings ought to have been completed within the timelines as set-out under Section 29A of the Act. Since the Second Arbitrator failed to do so, TIMES approached the Court within a period of three years from 7th February, 2018, i.e., after expiry of the oneyear time limit set under Section 29A(1) of the Act, and thus, the instant petition is within limitation. As far as ‘sufficiency of cause’ is concerned, Mr. Tandon submits that since the petition is within limitation period, TIMES need not satisfy ‘sufficient cause’ as contemplated under Section 29A(5) of the Act. It is further argued that the instant petition has been filed on 11th 2021(4) SCALE 338 [See paragraphs no. 53-56]. 1998 AIR (Del) 402. O.M.P. 230/1999 decided on 20th September, 2005. 1984 (25) DLT 226. September, 2020 and that TIMES is further entitled to the benefit of the Supreme Court’s orders in Suo Motu Writ (C) No. 3/2020 titled ‘In Re: Cognizance for Extension of Limitation.’ ANALYSIS
7. The Court has considered the contentions of the counsel for both parties. The undisputed fact before the Court is that the Second Arbitrator appointed by BSNL is in conflict with the judgment of the Supreme Court in Perkins Eastman (supra).
8. Thus, the Arbitral Tribunal comprising Shri. T.N. Tiwari cannot be permitted to continue. The only question that merits consideration is whether the delay on TIMES’ part in approaching this Court is a valid ground to reject the instant petition. In fact, Mr. Bansal has very fairly stated that had the mandate of the Arbitral Tribunal been alive, perhaps TIMES could have perched its case on the judgment of the Supreme Court in Perkins Eastman (supra), but that cannot be done in the facts of the case.
9. Although BSNL is insisting on adherence of timelines, it must be noted that according to BSNL, proceedings had to commence de novo upon the appointment of the Second Arbitrator. Meaning thereby, BSNL’s stance has been that proceedings which had transpired before the First Arbitrator would have no bearing before the Second Arbitrator. Although, there is no finality of any expression on this issue by the Second Arbitrator himself, BSNL’s stand is evident from the communications referred hereinabove. As per Section 29A(1), the timelines have to commence from the date of completion of pleadings in terms of Section 23(4) of the Act that stipulates that – the statement of claim and defence shall be completed within a period of six months from the date the arbitrator receives the notice of appointment. Thus effectively, the Second Arbitrator had effectively eighteen months to pass the award from the date of his appointment i.e., that is 7th February,
2017. However, concededly, that has not been done, and thus, TIMES certainly had the right to approach this Court for revival or continuation of mandate under Section 29A(5) of the Act. No statutory time limit has been provided for applying to the Court under the afore-noted provision. Considering the fact the Second Arbitrator is de jure unable to perform his functions as arbitrator, the instant petition is essentially for appointment of a Substitute Arbitrator for adjudication of unresolved disputes. Nevertheless, a party must approach the competent court within a period of three years in terms of Entry No. 137 of the Schedule to the Limitation Act, 1963. Keeping that in view, the instant petition filed on 11th September, 2020, is therefore, within the stipulated time.
10. Further, it cannot be disputed that the present dispute is indeed a live one – in as much as the bank guarantee in question – which is the bone of contention, continues to be in force. It is being kept alive by TIMES, despite termination of mandate of the Arbitral Tribunal.
11. Keeping that in mind, in the opinion of the Court, BSNL’s objection for resisting the appointment of the Substitute Arbitrator would be of no consequence.
TIMES certainly has the right to invoke Section 11 of the Act for seeking an appointment of an Arbitrator, since the cause of action is continuing and disputes remain unadjudicated.
12. For the foregoing reasons, TIMES’ request is allowed. On expiry of timelines as contemplated under Section 29A of the Act, the mandate of Second Arbitrator viz. Shri. T.N. Tiwari already stands terminated. However, for the sake of abundant caution and clarity, it has been declared so by virtue of this order.
13. In light of the same, the Court appoints Ms. Manini Brar, Advocate [Contact No.: +91 9205591340] as the Sole Arbitrator to adjudicate the disputes between the parties in relation to/ out of the afore-noted Agreement.
14. The parties are directed to appear before the learned Sole Arbitrator as and when notified. This is subject to the learned Arbitrator making necessary disclosure(s) under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act.
15. The learned Arbitrator will be entitled to charge her fee in terms of the provisions of the Fourth Schedule appended to the Act.
16. It is clarified that the Court has not examined any of the claims of the parties and all rights and contentions on merits are left open. Both the parties shall be free to raise their claims/ counter-claims before the learned Arbitrator in accordance with law.
17.
TIMES shall continue to keep the bank guarantee alive, till such time, the Arbitral Tribunal enters upon reference and BSNL seeks an interim measure under Section 17 of the Act, if so advised.
18. It is however, made clear that in case BSNL does not invoke Section 17 of the Act within a period of four weeks from the date of reference, the direction for keeping the bank guarantee alive shall automatically stand dissolved.
19. The petition is allowed in the above terms.