The High Court quashed an arbitral award passed by a sole arbitrator after the 12-month period stipulated in the agreement expired without the parties' consent to extend the time. The court held the arbitrator lost jurisdiction and set aside the award.
The impugned award dated 7th March, 2007 is quashed and set aside.
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.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 458 OF 2007
B.K. Gopakumar, Indian Inhabitant, Focus Films, P.B. No. 5710, Hotel Silver Sands Thiruvananthapuram-695 036.
....Petitioner.
Vs.
M/s. National Film Development Corporation Ltd., Regd. Office; “Discovery of India” Bldg., Nehru Centre, Dr. Annie Besant Road, Worli, Mumbai-400 018, represented by Dy. Manager (S& L/ P&A)
....Respondent.
Ms. Priti Menon i/by M/s. Shreeji & Lal for the Petitioner. Mr. A.K. Singh i/by M/s. Lex Remedeum for the Respondent.
CORAM : ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON :- 24/09/2010 JUDGMENT DELIVERED ON :- 01/10/2010
JUDGMENT:-
Rule, returnable forthwith.
3 The Petitioner-Producer - original Respondent has challenged award
dated 7th March, 2007, passed by an ex-officio- Arbitrator who was also the
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Chairman of M/s. National Film Development Corporation Ltd. (for short, the Corporation), based upon the Arbitration agreement between the parties.
4 Loan agreement dated 10th November, 1992 (the agreement) executed between the Petitioner and the Respondent-Corporation. Supplemental loan agreement dated 30th September, 1994 was also executed. As the Petitioner–producer unable to repay the amount, principal as well as interest, as of 31st March, 2001, by notice dated 29th October, 2001, the Corporation Manager invoked clause 17 of the Agreement and submitted to the then Chairman-Sole Arbitrator to invoke and adjudicate the claims against the Petitioner-producer. The said arbitration proceeding could not be proceeded as a new Chairman was appointed. By letter dated 12th May, 2005 again request was made to adjudicate the claims to the new Chairman who was also an ex-officio Arbitrator. The Arbitrator, thereafter, issued notice to both the parties on 14th May, 2005. Preliminary meeting dated 20th May, 2005 the Petitioner was absent. The Arbitrator directed the Corporation to file statement of claims. It was filed accordingly.
5 The next meeting was held on 18th June, 2005. On 28th January, 2006, 25th March, 2006 and 27th May, 2006, the Petitioner was again absent. The meeting was held on 20th January, 2007 to give an opportunity
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to the Petitioner. He was present on that day. As it is stated the Arbitrator after hearing both the parties, by an award directed the Petitioner to pay the amount within six months from 7th March, 2007.
6 The Petitioner has filed an application on 20th January, 2007 and raised a preliminary objection that the Arbitrator has no jurisdiction to proceed with the dispute and to adjudicate the claims in view of the clauses 17 (b) and 17 (c) of the Agreement it is stipulated that the Arbitrator shall make the award within 12 months from the date of entering on the reference. The Arbitrator shall be entitled with the consent of the parties to extend the time to make award. There was no consent obtained or given by the Petitioner at any point of time. Nothing is pointed on record with this regard even the consent of otherside. The Arbitrator without considering the above, passed impugned order on 07/03/2007.
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shall be no objection by the Producer that the said arbitrator is interested in the Corporation or in the dispute or difference or questions or that he has dealt with any matter in dispute or difference or that he has in the course of his duties expressed views on all or any of the matters in disputes or differences or questions and the decision of the said arbitrator shall be final, conclusive and binding on the both the parties.
The parties have agreed for above clauses to get adjudicated their differences/ disputes. As noted, at the first time the dispute was raised in the year 2001. There is nothing on record to show what happened to that proceedings, once initiated by invoking the above clauses in question. Second time in 2005, same clauses were invoked again and the Chairman being Arbitrator, issued notice to the Petitioner. The Petitioner for various reasons unable to attend the meetings so fixed by the Arbitrator. The Respondent filed statement of claim on 06/06/2005. The matter was again adjourned from time to time to give opportunity to the Petitioner, within 12 months. The Arbitration proceedings could not be completed. Admittedly, there is no written consent on record. On the contrary, the application dated 20th January, 2007 was filed by the Petitioner raising the preliminary objections in view of clause 17 (a), (b) and (c) as referred above, as there
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was no consent to extend the time to make the award. The continuation of proceedings after expiry of 12 months from the date of reference, itself is, therefore, illegal and bad in law. Even, we take 14th May, 2005, the date on which the Arbitrator issued notice and though served, the Petitioner failed to appear on the fixed dates except 20th January, 2007. The Arbitrator ought not to have proceeded further as there was no further time provided or agreed to extend the time to pass the award. The Application so filed shows that there was no consent given by the petitioner to extend the time to make the award. First reference was made in the year 2001 and the second in May, 2005. In both these cases, the Arbitrator unable to pass the award within 12 months from the date of the reference. The application so filed by the Petitioner was not decided. The Petitioner appeared on 20th January, 2007, that itself was after 12 months from May, 2005. The Arbitrator has not even referred to the earlier reference made in the year 2001. The award, therefore, so passed without obtaining the consent as required, therefore, was beyond the stipulated and agreed period of 12 months. Therefore, such award is bad in law and unsustainable. The Arbitrator could have passed ex-parte award within 12 months, as the Petitioner was not appearing inspite of service.
9 The Arbitrator, cannot on his own, without consent, even within stipulated period, extend the time for making/passing the award. The
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Arbitrator, as well as, the parties are bound by the consent terms/ clauses. As per Section 21 of the Act, the Arbitrator as referred, entered into the reference dated 20/05/2005 and as per the agreement bounding period for making the award itself expired in May, 2006. Instead passing an ex-parte order within the period fixed of 12 months, in absence of the Petitioner, the extension so granted even for granting opportunity to the Petitioner, is of no use, as the Arbitrator could not have continued with the proceedings in view of the specified clause and the agreed time. He looses the jurisdiction to adjudicate the matter. Such clauses, in my view, need to be respected in all circumstances. The parties have agreed for such clauses with intention to see and settle the dispute as early as possible within agreed time. If they themselves breach such clauses, there is no question of accepting the submission based upon Section 4 of the Act revolving around the doctrine of waiver and/or estoppel merely because the Petitioner or other party though served not appeared within stipulated time. If the clause provided that Arbitrator should make award within 12 months of entering into reference, there is no question of waiting beyond 12 months by any one. The Arbitrator could have obtained the consent from the parties to extend the time to make the award. In the present case, there is no such extension pointed out. The submission that there was implied consent, in the present facts and circumstances, is of no use for want of material and/or related evidence on the record.
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10 The Apex Court in 2010 (3) Mh.L.J. 18, NBCC Ltd. Vs. J.G. Engineering Private Limited , referring to sections 14, 15, 21 and 32 held that -(a) if consent is not given by the parties for enlargement of time the authority of the Arbitrator ceases automatically after expiry of the time so fixed; (b) the Court cannot exercise its inherent power to extend the time fixed by the parties in the absence of the consent of both the parties the same applies even to the arbitral tribunal; (c) the parties, if not agreed to the extension, the Arbitration proceeding terminates automatically.
11 The good intention of the Arbitration clause to resolve their disputes speedily through this process, as provided under the Act, still in the present facts and circumstances, is defeated completely. In my view, such clauses need to be respected and in the present case it supports the Petitioner though there was no specific denial to the claims raised by the Respondent. In view of above, therefore, no option but to set aside the impugned award on this ground itself.
12 The award dated 7th March, 2007 was dispatched on 4th May, 2007 and received on 17th May, 2007. The Petition under Section 34 (3) of the Act was filed on 16th August, 2007. Considering the facts and circumstances of the case as it is still within limitation of 3 months and 30
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days, the submission that the Petition is barred by law is unacceptable as there is case made out even to condone the delay, even if any. Therefore, the delay is also condoned. But the award need to be set aside.
(ANOOP V. MOHTA, J.)
3 issues framed by the court
Whether an arbitral award passed after the 12-month contractual period without express consent of the parties violates the agreed terms under Section 21.
Whether the limitation for filing a petition under Section 34(3) of the Arbitration and Conciliation Act, 1996 is barred.
Whether the arbitration proceedings terminate automatically upon expiry of the time fixed in the agreement absent consent to extend.
Colour shows how this judgement treated each authority
NBCC Ltd. Vs. J.G. Engineering Private LimitedRelied on¶46
2010 (3) Mh.L.J. 18, NBCC Ltd. Vs. J.G. Engineering Private Limited · Who else cites this
2 provisions across 1 enactments
B.K. Gopakumar
M/s. National Film Development Corporation Ltd.
Anoop V. Mohta
As recorded by the court registry
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