Petitioner challenged the termination of arbitral proceedings by the sole arbitrator under Article 226, alleging error in denying extension of time. Court held termination was justified due to petitioner's delay and inaction.
Writ petition dismissed. No costs awarded.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1533 OF 2007
Rajesh Shah .. Petitioner
Versus
Hemendra V. Kothari & Ors. .. Respondents
Mr.Birendra Saraf alongwith Mr.Ashish Kamath i/by
M/s.Kartikeya and Associates for petitioner.
Mr.A.K.Koltli for respondent No.3.
CORAM: S.C.DHARMADHIKARIJ.
DATE : 17th June, 2008
P.C.
1. Heard Mr.Saraf appearing for the petitioner and
the learned advocate appearing for contesting respondent
No.3.
2. The order under challenge is passed by the
Arbitral Tribunal consisting of a sole arbitrator. The
order terminates the arbitral proceedings. The
arbitrator has taken recourse to section 25(a) of the
Arbitration and Conciliation Act, 1996.
3. The petitioner is the original claimant. He had
approached this Court by filing an Arbitration petition
being Arbitration Petition No.251 of 2006 under section
9 of the Arbitration and Conciliation Act, 1996.
Initially an order was made in that petition on 07th
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July, 2006. Thereafter, the petition was placed before
a learned single Judge of this Court on 23rd August,
2006. By consent of parties the following order was
passed:
"By consent of parties, petition is disposed of
in following terms:
1. By consent of parties, Hon’ble Mr.Justice
V.P.Tipnis (Retd.) is appointed as an arbitrator.
The disputes between the parties are referred to
the arbitrator to decide in accordance with law.
2. Ad-interim order granted by this court by
order dated 07th July, 2006 shall continue to
operate for a period of eight weeks.
The learned counsel appearing for the Respondents
states that even before this petition was filed
the Respondents have created third party interest
in the month of February, 2006 in favour of
Riving Land Development Pvt.Ltd.
Statement is accepted.
3. The petitioner shall be at liberty to
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seek appropriate interim orders from the learned
arbitrator."
4. Thus, by consent of parties a retired Judge of
this Court was appointed as an arbitrator. The matter
was placed before the arbitrator and in the meeting that
was convened by him on 30th September, 2006 he issued
directions. The directions are issued both to the
original claimant-petitioner before me and the
respondents. The order in that behalf reads thus:
1. The claimant shall file their claim
alongwith copies of all the documents on which
they rely on or before 15th November, 2006. The
claimant shall simultaneously serve a copy of the
claim and all the accompanying documents on the
respondents on or before 15th November, 2006.
2. The respondents shall file their written
statement and counter claim, if any, alongwith
all the documents on which they rely on or before
29th November, 2006. The respondents shall serve
the copy of the written statement and counter
claim if any alongwith documents on which they
rely upon the claimants on or before 29th
November, 2006.
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3. The claimant shall file their reply to
the counter claim of the respondents if any
alongwith documents on which they rely on or
before 13th December, 2006. Claimant shall serve
the copy of reply alongwith all the documents on
the respondents on or before the same date.
4. The parties shall communicate to each
other the documents which are admitted and/or
disputed on or before 21st December, 2006.
5. Further date for determining the points
at issue shall be fixed after pleadings are
completed.
6. Reading charges of Rs.8,000/- shall be
paid to the Arbitrator within 6 weeks from today.
The said charges will be shared by the parties
equally.
7. The hearing charges of the Arbitrator
shall be Rs.35,000/- per day or part of the day
which shall be shared equally by the parties.
8. All other expenses of the arbitration
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proceedings shall be shared by the parties in
equal proportion.
9. Aforesaid order is passed and dates have
been fixed by consent of the parties."
5. It is undisputed that the entire schedule was
fixed by consent of parties. It is an admitted position
that the petitioner- claimant did not file the Statement
of Claim before the date stipulated in the above order.
It is also not in dispute that no application was made
prior to the stipulated date, that is, 15th November,
2006 for extension of time. On 15th November, 2006 the
Advocate for the petitioner claimant addressed the
following communication to the learned arbitrator:
"We refer to the meeting held on 30th September,
2006, when Your Lordship had directed us to file
the statement of claim alongwith copies of all
documents relied upon by our clients on or before
15th November, 2006. We regretfully state that
we are unable to file the same as our
Mr.K.G.Desai who is attending to the above matter
was travelling out of Bombay and resumed office
only last week. In the circumstances, we have to
request your Honour to kindly extend the time for
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filing the Statement of Claim by a period of
three weeks from today. We shall be filing the
Statement of Claim on or before 06th December,
2006.
We regret for the inconvenience caused to the
Hon’ble Arbitral Tribunal and Respondents."
6. The arbitrator has on 12th February, 2007 made
the order impugned in this petition on the basis that
the application for extension of time was made by the
above letter dated 15th November, 2006. The petitioner
claimant stated before the arbitrator that three weeks
extension be granted and the Statement of Claim will be
filed positively on or before 06th December, 2006. The
petitioner claimant did not do so. The arbitrator
ultimately addressed the impugned communication/letter
in which he observed that in the light of the failure
and negligence to file Statement of Claim he has no
alternative but to terminate the aforesaid arbitral
proceedings. Accordingly, proceedings are terminated.
It was also recorded that the petitioner claimant has
failed to abide by clause 6 of the order dated 20th
September, 2006. The respondents’ advocate had
forwarded a cheque of Rs.40,000/- towards the arbitral
fees but the arbitration being terminated the learned
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arbitrator cancelled the said cheque and did not encash
it.
7. Now, Mr.Saraf makes twofold grievance. His first
contention is that Arbitral Tribunal is performing a
public duty. He can, therefore, come within the term
"person" under Article 226 of the Constitution of India
and more particularly sub-article 1 thereof. A writ of
certiorari therefore would go to the Arbitral Tribunal
and this Court can consider the challenge to the order
terminating the proceedings. In other words, the Writ
Petition is maintainable. Reliance is placed upon a
judgment of this Court in the case of M/s.Anuptech
Equipments Private Ltd. Vs. M/s.Ganpati Co-operative
Housing Society Ltd. & Ors. reported in (1999(2) BCR
Page 331).
8. The second submission of Mr.Saraf is that the
learned arbitrator was in error in terminating the
proceedings. He submits that the arbitrator was duly
communicated the inability to file Statement of Claim
and he had extended the time. Even otherwise, the
matter could have been considered sympathetically. In
the submission of Mr.Saraf, the petitioner has fully
abided by the interim order and directions of this
Court. The money has been deposited in this Court.
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This Court with a view to expedite the resolution of the
dispute between parties thought it fit to refer the
matter to arbitration. The course suggested and adopted
by this Court was with consent of parties. In such
circumstances, now relegating the petitioner to a suit
and taking away his right to proceed with the arbitral
proceedings will result in grave miscarriage of justice
and therefore, this Court should interfere in writ
jurisdiction.
9. I am unable to accept this contention of
Mr.Saraf. Without entering into any larger controversy
and issue and assuming that present Writ Petition is
maintainable, in my view, this is not a fit case for
exercising the equitable, discretionary and
extra-ordinary jurisdiction under Article 226 of the
Constitution of India in favour of the petitioner.
10. The petition itself proceeds on the admitted
facts. This Court appointed an arbitrator by consent of
parties on 23rd August, 2006. The learned arbitrator
promptly accepted the appointment and placed the matter
for issuance of preliminary directions. He issued
preliminary directions on 30th September, 2006, which
directions were issued by consent of both sides. Time
was given to complete filing of pleadings. It is not
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disputed before me that time granted for filing of
Statement of Claim i.e from 30th September, 2006 to 15th
November, 2006 was fair and reasonable. It ensured that
the petitioner-claimant had sufficient time to peruse
the record and consult the lawyers so also file his
Statement of Claim. That apart, the communication dated
15th November, 2006 addressed to the arbitrator does not
set out any reason as to why the claimant could not file
Statement of Claim or in any event could not make any
application for extension before the returnable date.
In the communication, what is stated is that the
claimant’s advocate was travelling out of Bombay and
resumed work in the week prior to the date of the letter
i.e 15th November, 2006. Therefore, a request was made
to extend the time by three weeks. Now, it is clear
that the arbitrator did not pass any order on this
application and therefore, parties proceeded on the
basis that the time was extended by three weeks.
However, the arbitrator waited till February 2007 and
still no steps were taken to file the Statement of
Claim.
11. Despite all this Mr.Saraf would urge that the
arbitrator was obliged to issue a show cause notice to
parties before terminating the proceedings. Reliance
was placed by him on section 25(a) and a decision of the
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Andhra Pradesh High Court. The submission is that the
Arbitration and Conciliation Act provides for
consequences in case of default of a party. The
termination of proceedings by the arbitrator is a
drastic step. Therefore, before such a step is resorted
to and the proceedings are terminated by the Arbitral
Tribunal it should give sufficient opportunity to the
party.
12. In the peculiar facts of this case, I have
declined to go into these aspects and therefore Mr.Saraf
was not heard in further details. Even otherwise, the
petitioner is not prejudiced by the action of the
arbitrator terminating the proceedings. He had enough
notice in the matter. He is aware of the consequences
in law. He knew he is in default and made a belated
request for extension of time.Even after the extended
period he took no steps in the matter. His conduct
exhibits disinterest and scant regard for the directions
issued by the arbitrator. This is not a case where the
petitioner claimant was not aware of the default
committed by him. He has admitted that there was a
default. That is why after the stipulated date i.e 15th
November, 2006 the communication was addressed. The
arbitrator showed leniency and did not take any action.
But even within the extended period no steps having
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being taken by the petitioner, the arbitrator was
constrained to terminate proceedings and that is how the
communication/letter addressed by him to petitioner on
12th February, 2007 proceeds. It was not expected of
the arbitrator in the peculiar facts of this case to
wait indefinitely. More so, when his communication
records that there is no compliance by the
petitioner-claimant with the directions issued on 30th
September, 2006 and more particularly with regard to
payment of reading charges. Having accepted the
assignment as early as in August 2006 the Arbitral
Tribunal waited for compliance of its directions. It is
not as if he has terminated the proceedings only for
non-payment of his fees. The learned arbitrator was
aware of the fact that one of the parties has deposited
the fees. However, the petitioner-claimant having not
taken steps to file his Statement of Claim the
arbitrator was of the opinion that the matter cannot
proceed further. He waited for the petitioner and his
advocate to file the Statement of Claim. When he found
that the petitioner was not serious in abiding by the
directions and is not desirous of expeditious resolution
of the dispute through arbitration that finally he
passed the order terminating the proceedings. He was
fair to parties in as much as he did not encash the
cheque forwarded by the respondents.
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13. In the peculiar facts of this case and
considering the conduct of the petitioner-claimant, I do
not find that the arbitrator was in error in terminating
the proceedings. The petitioner never raised the ground
of his illness earlier. If he was under medical
treatment he could have moved the Tribunal and requested
for further time. In a Writ Petition, for the first
time, the ground of illness is introduced. The medical
certificates are of December 2006 and January 2007.
However, the arbitrator waited till February 2007.
Therefore, neither is his decision erroneous or vitiated
as urged nor could it be said to be perverse or based on
no material. The law confers him with the power which
is exercised on justifiable grounds. The decision to
terminate cannot be termed as unfair, unjust or
unreasonable either. Needless to observe that when
parties resort to Arbitration and the Court proceeds to
appoint arbitrators by consent, then, it is expected
that they desire expeditious resolution of the disputes.
An arbitrator steps in so that the matters can be
decided expeditiously. A reference to arbitration
should not drag on like civil suits. If the intent of
the arbitrator is to instil sense of urgency in the
proceedings, then, default of parties must result in the
consequences provided in law. One who is in default
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cannot turn around and blame the arbitrator for
Termination of the proceedings on account of his
conduct. In such circumstances, this is not fit case
for exercising writ jurisdiction. Petition is
dismissed. No costs.
(S.C.Dharmadhikari, J)
2 issues framed by the court
Whether a writ of certiorari is maintainable against an arbitral tribunal terminating proceedings for default.
Whether the arbitrator committed error in terminating proceedings without issuing a show cause notice.
Colour shows how this judgement treated each authority
M/s.Anuptech Equipments Private Ltd. Vs. M/s.Ganpati Co-operative Housing Society Ltd. & Ors.Referred¶48
M/s.Anuptech Equipments Private Ltd. Vs. M/s.Ganpati Co-operative Housing Society Ltd. & Ors. (1999(2) BCR Page 331)
2 provisions across 2 enactments
Rajesh Shah
Hemendra V. Kothari & Ors.
S.C.Dharmadhikari
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court