Allowed

M/S.Kcs Pvt.Ltd v. Rosy Enterprises,Rourkels

Orissa HC6 Jul 2018WP(C)/25344/2017

Case brief

AI extract

What is this about?

The High Court of Orissa quashed an order rejecting a joint application for extending the time limit for an arbitral award. The court held the District Judge had jurisdiction contrary to reliance on other High Courts, and granted a six-month extension.

What did the court decide?

The impugned order was quashed and the time for passing the arbitral award was extended by an additional six months from the date of this order.

M/S.Kcs Pvt.Ltd Vs Rosy Enterprises,Rourkels — Arbitration | Orissa HC (2018)

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HIGH COURT OF ORISSA: CUTTACK.

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W.P.(C) No. 25344 of 2017

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In the matter of an application under Articles 226 and 227 of the Constitution of India.

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M/s. KCS Private Limited, Sahoo House, Power House Road, PS: Plant Site, Rourkela, Dist: Sundargarh, represented by its Director, Sri Gouri Sankar Sahu, aged 41 years, son of Sri Kishore Chandra Sahu. …… Petitioner

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-Versus-

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Rosy Enterprises, C/105, Nirmal Market, Power House Road,
Plant Site, Rourkela,
Dist: Sundargarh and another	…… Opp. Parties
For Petitioner : M/s.	Damodar Pati, S.K. Mishra, D.R. Mohapatra, P.R. Mishra, G. Dash and S.K. Dash.
For Opp. Parties : M/s.	U.C. Mishra, Ashutosh Mishra, P.K. Tripathy & J.K. Mohapatra

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PRESENT:

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THE HONOURABLE SHRI JUSTICE S.K. MISHRA

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Date of Judgment – 06 .07.2018

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S.K. MISHRA, J. In this writ petition, the petitioner assails the order dated

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16.11.2017 passed by the learned District Judge, Sundargarh in Arbitration Petition No.06 of 2017 rejecting the joint application filed by the petitioner and the opposite parties for extension of time for making the award on mutual consent under sub-section (4) of Section

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29A of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act” for brevity).

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02 . Facts are not disputed. It is apparent from the records that an agreement was entered into between the parties at Rourkela and as per the work order issued on 14.01.2010, the consortium consisting the petitioner and opposite parties was given the order of execution of work inside the Rourkela Steel Plant by MECON LTD. The agreement was between the petitioner and the opposite parties, who are parties to the consortium. It has an arbitration clause. As dispute arose between the parties and could not be resolved amicably, this Court as per order dated 07.04.2016 passed in Arbitration Petition No.17 of 2013 appointed Sri Gayadhar Panda, retired District Judge, as the Sole Arbitrator to decide the dispute.

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03 . Pursuant to the notice dated 07.5.2016 issued by the learned Coordinator, High Court of Orissa Arbitration Centre, Cuttack, the matter of arbitration has been registered as Arbitration Proceeding No.18 of 2016. Pursuant to the above notice, the learned Arbitrator commenced the proceeding of arbitration and the same is continuing since 24.05.2016. It is the case of both the parties that the arbitration proceeding could not be concluded within a period of twelve months i.e. by 23.05.2017, for which with the consent of both

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the parties, the learned Arbitrator vide order dated 05.06.2017 extended the period of arbitration for a period of six months, i.e. up-to 23.11.2017 as envisaged under sub-section (3) of Section 29A of the Act.

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04 . It is the case of both the parties that they have produced voluminous documents which are very much required for just adjudication of the dispute. Because of voluminous documents and lengthy cross-examination, it was practically impossible for the Arbitral Tribunal to complete the proceeding by 23.11.2017. Accordingly, the present petitioner filed an application before the learned District Judge, Sundargarh, which has been registered as Arbitration Petition No.6/2017, for extension of time under Section 29A of the Act. The opposite parties also did not contest the same and agreed for extension of time. However, the learned District Judge come to the conclusion that no other Court except the Hon’ble Apex Court and this Court have been conferred with the power to appoint Arbitrator as per the provisions of the Act. Hence, the learned District Judge was of the view that he does not have jurisdiction to appoint Arbitrator. So he lacks power to extend the period for passing of arbitral award.

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05 . Learned counsel appearing for both parties agreed that there is no covered judgment and it has to be decided on the facts of the case. For this purpose, it is appropriate to take note of Section 29A of the Act and quote the same for the purpose of proper appreciation. It reads as follows:-

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“29A . Time limit for arbitral award .-(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.

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Explanation .- For the purpose of this subsection, an arbitral tribunal shall be needed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, or their appointment.

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(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.

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(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

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(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

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Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. (5) The extension of period referred to in subsection (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

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(6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of 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 arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

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(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

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(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.

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(9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.”

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06 . Sub-section (1) of Section 29A of the Act provides that the

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award shall be made within a period of twelve months from the date

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the arbitral tribunal enters upon the reference. Sub-section (2) of Section 29A of the Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. Sub-section (3) of Section 29A of the Act provides that the parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. As far as sub-section (4) of section 29A of the Act is concerned, the mandate of the arbitrator

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shall terminate unless the court has, either prior to or after the expiry of the period so specified, extended the period. There are also provisions regarding deduction of fees of the Arbitral Tribunal if the court finds that the delay has been caused because of the reasons attributed to the Arbitral Tribunal. So the most important provision is sub-section (4) of Section 29A of the Act. It is apparent from sub-section (4) of Section 29A of the Act that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period.

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07 . Similar question arose before a Single Judge Bench of Kerala High Court in OP(C) No.3256 of 2017 (O) ( M/s. URC Construction (Private) Ltd., No.119, Power House Road, Tamilnadu, Erode-638001, represented by Managing Director, C. Devarajan –vrs.- M/s. BEML Ltd., Palakkad Complex, Kinfra Wisepark, Menonpara Road, Kanjikode, Palakkad-678621, Rep. by its Chief General Manager, P. Sivakumar ) decided on 16^th November, 2017, wherein an application was filed under Sub-Section (5) of Section 29A of the Act. The Single Judge Bench of the Kerala High Court having taken note of the judgments of the Hon’ble

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Supreme Court in the case of M/s. Pandey and Co. Builders Pvt. Ltd. –vrs.- State of Bihar : (2007) 1 SCC 467 and in the case of State of West Bengal and others –vrs.- Associated Contractors : (2015) 1 SCC 32, held that “ under the provisions of the Arbitration and Conciliation Act, 1996 the competent court is fixed as the Principal Civil Court exercising original jurisdiction or a High Court exercising original civil jurisdiction, and no other Court ”. Therefore, the Single Bench of the Kerala High Court holding that the Kerala High Court does not have jurisdiction to extend the time under Sub-Section (5) of Section 29A of the Act, dismissed the original petition as not maintainable giving liberty to the petitioner therein to file appropriate application before the appropriate forum.

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08 . It is appropriate to quote the exact ratio laid down by the Hon’ble Supreme Court in the case of M/s. Pandey and Co. Builders Pvt. Ltd. (supra). It is quoted below:

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“16. Unlike the 1940 Act, the Arbitrator is entitled to determine his own jurisdiction. In the event, the Arbitrator opines that he has jurisdiction in the matter, he may proceed therewith, which order can be challenged along with the award in terms of Section 34 of the 1996 Act. If the Arbitrator opines that he has no jurisdiction to hear the matter, an appeal lies before the court. “Court” has been defined in Section 2(1)(e) of the 1996 Act in the following terms:

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“2(1)(e) ‘court’ means the principal Civil Court of original jurisdiction in a

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district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subjectmatter 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;"

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It is not disputed before us that the Patna High Court does not exercise any original civil jurisdiction. The definition of "court" as noticed hereinbefore means the Principal Civil Court of original jurisdiction in a district and includes the High Court which exercises the original civil jurisdiction. If a High Court does not exercise the original civil jurisdiction, it would not be a “court” within the meaning of the said provision. Constitution of the courts vis-a-vis the hierarchy thereof is governed by the 1887 Act, Section 3 whereof reads as under:

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“3. Classes of Courts.- There shall be the following classes of Civil Courts under this Act, namely: -

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(a) The Court of the District Judge;

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(b) The Court of the Additional Judge;

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(d) The Court of the Munsif."

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Chapter III of the 1887 Act relates to ordinary jurisdiction of the civil courts. Section 18 provides for extent of original jurisdiction of District and Subordinate Judge in the following terms:

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“18. Extent of original jurisdiction of District or Subordinate Judge.-Save as otherwise provided by any enactment for the time being in force, the jurisdiction of a District Judge or Subordinate Judge extends, subject to the provisions of Section 15 of the Code of Civil Procedure, 1908 to all original suits for the time being cognizable by Civil Courts”."

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09 . A Three Judge Bench of the Hon’ble Supreme Court in the case of State of West Bengal and others (supra), wherein the

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question arose that which court has the jurisdiction to entertain and decide the application under Section 34 of the Act. Hon’ble Supreme Court in the case of State of West Bengal and others (supra) have

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held that “ section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of Original Jurisdiction in the district or a High Court having original civil jurisdiction in the State, and no other court as “court” for the purpose of Part I of the Arbitration Act, 1996. The definition of “court” in Section 2(1)(e) in the 1996 Act fixes “court” to be the Principal Civil Court of Original Jurisdiction in the district or the High Court in exercise of its ordinary original civil jurisdiction. Section 2(1)(e) further goes on to say that a court would not include any civil court of a grade inferior to such Principal Civil Court, or a Small Cause Court. The definition is an exhaustive one as it uses the expression “means and includes”. It is settled law that such definitions are meant to be exhaustive in nature”. Hon’ble Supreme Court further held that “ where a High Court exercises ordinary original civil jurisdiction over a district, the High Court will have preference to the Principal Civil Court of Original Jurisdiction in that district. Firstly, the very inclusion of the High Court in the definition would be rendered nugatory if the above conclusion was not to be accepted, because the Principal Civil Court of Original Jurisdiction in a district is always a court lower in grade than the High Court, and such District Judge being lower in grade than the High Court would always exclude the High Court from adjudicating upon the matter. Secondly, the provisions of the Arbitration Act leave no room for any doubt that it is the superior most court exercising original

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jurisdiction which has been chosen to adjudicate disputes arising out of arbitration agreements ”. It was a case of Calcutta High Court which exercised original civil jurisdiction. Hence, the Hon’ble Supreme Court have held that the High Court of Calcutta was held to be the Principal Civil Court of Original Jurisdiction. Thus, it is clear that while the High Courts of Patna and Kerala are not the ‘Court’, the Calcutta High Court is the ‘Court’ within the meaning of Section 2(1)(e) of the Act.

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10. The High Court of Orissa does not exercise the original civil jurisdiction. Sub-Section (2) of Section 2 of the Orissa Civil Courts Act, 1984 provides that the court of the District Judge shal1 be the principal court of original civil jurisdiction in the district and the explanation provides that for the purpose of this sub-section the expression ‘District Judge’ shall not include an Additional District Judge. Thus, for the State of Odisha, the District Judge is the ‘Court’ within the definition of the aforesaid Section.

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11 . In that view of the matter, the learned District Judge, Sundargarh does have jurisdiction under Sub-Section (5) of Section 29A of the Act to extend the period of passing of the arbitral award. Instead of remanding the matter, as considerable time has been elapsed in the mean time, this Court think it proper to extend the time as prayed for by the petitioner and the opposite parties. It may

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be remembered that the petitioner and the opposite parties have filed a joint petition before the learned District Judge, Sundargarh and both the parties are agreed to extend the time frame as envisaged under Section 29A of the Act, I am inclined to extend the time for passing of the arbitral award. Secondly, it is stated that the matter of dispute is complicated and involves voluminous evidence. Hence, in the interest of justice, it is appropriate to extend the period of passing of arbitral award by another six months, which would start from the date of production of certified copy of this order before the Arbitral Tribunal.

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12 . With the aforesaid observations, this writ petition is allowed. The order impugned is hereby quashed. There shall be no order as to cost.

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..………………….. S.K. Mishra, J.

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Orissa High Court, Cuttack, Dated 6th July, 2018/AKB/B. Jhankar

M/S.Kcs Pvt.Ltd v. Rosy Enterprises,Rourkels

Case brief

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M/S.Kcs Pvt.Ltd v. Rosy Enterprises,Rourkels

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