Haryana Packaids Pvt Ltd v. Indian Oil Corporation & Ors

Judgement].

14.3 In the instant case, admittedly, six (6) months accorded by this court vide order dated 25.02.2010, came to an end on 16.09.2010. Parties by mutual consent, at the hearing held on 11.09.2010, extended the period by one (1) month to enable respondent no.3 (i.e., the arbitrator) to render a decision qua the reference. The extended period of one (1) month was to commence from 16.09.2010.

14.4 Admittedly, even according to respondent no.3, this period came to an end on 15.10.2010; as recorded by him in the hearing held on 23.10.2010.

14.5 In these circumstances, one can only conclude that the arbitrator had become functus officio, if not on 16.09.2010, but certainly on 15/16.10.2010.

¶15If that being the position, respondent no.3 cannot continue as an arbitrator. I may only notice, that in the NBCC Ltd. vs J.G. Engineering Private Limited case, on the aspect as to whether an appointee of a court can continue as an arbitrator, the matter was remanded to the concerned High Court in view of the judgement of the Supreme Court in Northern Railways vs Patel Engineering Co. Ltd., 2008 (10) SCC 240, wherein the court had

observed that while it was not mandatory on the Chief Justice, or any person or institution designated by him, to appoint the named arbitrator, due regard must be given to the qualifications required by the agreement or other considerations to secure the appointment of an independent and impartial arbitrator. The court also observed that in Northern Railways vs Patel Engineering Co. Ltd. (supra), there was, a reference to an earlier decision rendered in Ace Pipeline Contracts ltd. vs Bharat Petroleum Corporation Ltd, 2007 (5) SCC 304.

¶16Furthermore, this aspect of the matter has been considered by the Supreme Court in a recent judgement, in the case of Union of India vs Uttar Pradesh State Bridge Corporation Ltd. (supra). After examining a plethora of judgements, the Court came to the conclusion that the "default procedure", which was applied for appointment of independent arbitrators by the court, in exercise of its powers under Section 11 of the 1996 Act, could also be exercised for appointment of a substitute arbitrator in place on an existing arbitrator, where arbitration was delayed beyond a reasonable time. This power, however, was to be exercised having regard to facts and circumstances of each case. The relevant observations are contained in paragraphs 18 to 22 of the judgement.

16.1 The Supreme Court in that case finally sustained the exercise of power by the High Court under Section 11, whereby it had substituted the existing arbitral tribunal. ISSUE No. (iii) & (iv)

¶17These two issues can be dealt together as they are inter-dependant. In so far as issue no. (iv) is concerned, I have no difficulty in coming to the conclusion that the court has the power to appoint a new arbitrator in place of the incumbent arbitrator; provided it were to come to the conclusion that

there has been undue delay in concluding the arbitration proceedings. [See discussion hereinabove in paragraphs 14 to 16]. In so far as the aspect of delay is concerned, that is subject matter of Issue no.(iii); an aspect discussed below in the context of facts delineated above.

¶18The narration of the facts would demonstrate that the incumbent arbitrator is the fourth (4th) arbitrator, who had been charged with the duty to conclude the proceedings. Prior to respondent no.3 entering upon reference, nearly twelve (12) years had already passed since the time, the first arbitrator was appointed to adjudicate upon the disputes arising between the parties herein. Given these facts, respondent no.3 ought to have been conscious about the fact that arbitration proceedings were required to be concluded, as expeditiously as possible, especially, having regard to the direction of the court issued vide order dated 25.02.2010.

18.1 Respondent no.3, instead of concluding the proceedings, allowed IOCL to move one application after the other, even after the petitioner's counsel had commenced oral submission in the matter.

18.2 What made matters worse is, that respondent no.3 allowed IOCL to move an application, on 23.10.2010, when the extended time frame beyond the time accorded by this court, had already came to an end.

18.3 In sum, the only conclusion that one can draw, is that, respondent no.3 has failed to act with due alacrity in the matter. That being so, I am persuaded to accept the submission advanced by Mr Bahl that the mandate of respondent no.3 is liable to be terminated under Section 14(1)(a) as he has failed to act without undue delay. If that being my conclusion, which it is, I see no reason not to exercise my power under Section 11(6) of the 1996 Act to appoint an arbitrator in the matter, in substitution to respondent no.3.

¶19The judgements cited by Mr Kalra are clearly distinguishable. The

judgment in Progressive Career Academy Pvt. Ltd. vs FITT JEE Ltd. (supra) dealt with an issue, as to whether an arbitrator could be removed on the ground of bias by seeking the termination of his mandate under Section 14 of the 1996 Act. The court in that case came to a conclusion that such allegations of bias could be tested only after the final award was published in a petition under Section 34 of the Act and, therefore, no interference was called for by the court at the pre-award stage.

19.1 The position of law, as articulated in Hashmukhlal H. Doshi & Anr. Vs Justice M.L. Pendse & Ors. (supra) was no different.

19.2 In the instant case, the mandate of the arbitrator, i.e., respondent no.3 is being terminated on the ground of undue delay. The proceedings carried on by arbitrators appointed, one after the other, by Director (Marketing), IOCL, have now dragged on for yearly sixteen (16) years, without seeing the light of the day. Resultantly, the entire ethos behind arbitration stands completely defeated. Parties are encouraged to engage in arbitration proceedings, so that disputes are adjudicated fairly, with economy of time and expense, as an added attraction. The instant arbitration has certainly lost out on economy of time, and would have thus put the petitioner, which is a miniscule entity, as compared to IOCL, to a great distress, financially.

¶20In view of the foregoing discussion, I am persuaded to hold that respondent no.3's mandate ought to be terminated. It is ordered accordingly. In order to expedite the conclusion of the proceedings, I hereby appoint Mr G.P. Thareja, Retd. ADJ (Ph. No. 011-20906899) as an arbitrator in the matter. The learned arbitrator shall though continue with the proceedings from the point at which they are positioned presently. While doing so, he shall also deal with the application dated 23.10.2010 filed by IOCL. Having regard to the huge expanse of time which has elapsed, since

the dispute arose between the parties herein, the learned arbitrator will endeavour to conclude the proceedings with requisite expedition, though not later than four (4) months. Parties will appear before the arbitrator on

10.03.2015. In case the said date is not convenient, the learned arbitrator will give a date in close proximity of the date indicated above. The period of four (4) months shall commence from such date. For this purpose, the learned arbitrator shall be paid a fee of Rs. 1 lac to be shared equally by both parties. In addition to the fee, the learned arbitrator will also be reimbursed any expense incurred by him, albeit on actual basis.

20.1 As a consequences of the directions issued hereinabove, the respondent no.3's application being: IA No. 15690/2010 filed in OMP No. 235/2008, shall also stand dismissed. It is ordered accordingly. IA No. 14514/2011 seeking condonation of delay is allowed, for the reasons given therein, coupled with the fact that there is no opposition preferred qua the said application.

¶21Parties are, however, left to bear their own costs.

RAJIV SHAKDHER, J MARCH 04, 2015 kk

* IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on: 10.12.2014 % Judgment delivered on: 04.03.2015 + OMP Nos. 692/2011 & 235/2008 HARYANA PACKAIDS PVT. LTD. ..... Petitioner Versus INDIAN OIL CORPORATION LTD. & ORS. ..... Respondents Advocates who appeared in this case: For the Petitioner : Mr. Rajiv Bahl & Ms Usha Mann, Advocates. For the Respondents : Mr. M.M. Kalra & Mr Kunal Kalra, Advocates. CORAM: HON'BLE MR. JUSTICE RAJIV SHAKDHER OMP 692/2011 & IA No. 14514/2011 (Condonation of delay in re-filing petition) IA No. 15690/2010 (for extension of time by arbitrator) in OMP No. 235/2008 1. This is a petition, essentially, filed under Section 14(1)(a) and 14(2) read with Section 11(6) and 11(8)(b) of the Arbitration & Conciliation Act, 1996 (in short the 1996 Act). 1.1 In addition to the above, provisions of Section 18(4) of the Micro, Small and Medium Enterprises Development Act, 2006 (in short the 2006 Act), have also been invoked. 1.2 In effect, the petitioner seeks to replace the present incumbent, who is functioning as an arbitrator, namely, one Sh. M.K. Jain, with a court appointee. Sh. M.K. Jain has been arrayed as respondent no.3 to the present proceedings. Apparently, since the 2006 Act is applicable to the petitioner, one of the prayers made in the petition adverts to the fact that the micro and small enterprises council/centre could act as an arbitrator or as conciliator under Section 18(4) of the 2006 Act. Though, during the course of arguments, this prayer was not pressed. 2. I may only note that the petitioner had earlier filed a petition bearing OMP No. 235/2008, in this court, for the very same relief, when a Single Judge of this court vide order dated 25.02.2010 disposed of the said petition, albeit with the consent of parties, by replacing the then arbitrator, one, Sh. S. Mazumdar. It was recorded that the parties had agreed that the arbitration proceeding shall stand concluded within six (6) months from the date, the new arbitrator entered upon reference. 2.1 It is in these circumstances, that respondent no.3 was appointed as an arbitrator. 2.2 The hope that the proceedings would stand concluded within six (6) months, stood belied, as is obvious', from the turn of events. It is in these circumstances, that the petitioner, appears to have approached this court, once again, for the removal of respondent no.3 as the arbitrator. 3. I may also note that the captioned petition was moved and, consequently, got listed on for the first time on 13.09.2011, when my predecessor was informed that an application for extension of time, being: IA No. 15690/2010 had been filed in OMP No. 235/2008. The said application was, however, listed before another Single Judge of this court. Consequently, the learned Judge directed that the captioned petition along with IA No. 14514/2011, be placed before the Judge, who was dealing with IA No. 15690/2010 filed in OMP No. 235/2008. IA No. 14514/2011 is an application filed by the petitioner seeking condonation of delay in re-filing. According to the petitioner, there is a delay of 24 days in re-filing the captioned petition, i.e., OMP No. 692/2011. 3.1 Though no formal notice was issued, parties have completed pleadings in the matter, whereupon arguments were heard and judgement was reserved. There is no formal reply filed by the respondents to the aforementioned application seeking condonation of delay in re-filing. Reply to the main petition has, however, been filed only by respondent no.1 (IOCL), which in effect, is the contesting party. Respondent no.2 is the Director (Marketing), IOCL, while respondent no.3, as noticed above, is the person who is presently charged with conducting arbitration in the matter. 3.2 It appears that since the captioned petition and IA No. 15690/2010, in OMP No. 235/2008, were being listed together, after order dated 13.09.2011 was passed in the instant matter, erroneously, based on the statement made by counsel for the petitioner that OMP No.