Limra Electricals A Proprietorship Concern vs Bharat Sanchar Nigam Limited and Others

Aravind Kumar, J.—These petitions are filed seeking appointment of Arbitrator to resolve the disputes and differences said to have arisen between the parties by virtue of agreements dated (three agreements in each petition).

I have heard the arguments of learned Advocates appearing for the parties.

By virtue of clause 25 of the agreement, petitioner raised a dispute and requested second respondent to refer the dispute that has arisen between the parties for being arbitrated. Second respondent being Appointing Authority in terms of clause 25 of the contract, appointed the sole arbitrator to resolve the disputes between parties. On 25.07.2011 sole arbitrator entered reference and after issuing notices, claim statements have been filed and contesting respondent has also filed counter claim to the statement of claims filed by petitioners. The entire process of filing of pleadings have been completed subsequent thereto, petitioners are stated to have requested the sole arbitrator to fix the date of hearing and to proceed with arbitration proceedings and on account of his inaction to conduct the proceedings, petitioners have approached this Court for appointment of a new arbitrator.

Learned Advocates appearing for the parties in chorus submit that sole arbitrator who has been appointed has since been transferred to New Delhi by the Department on account of the exigencies of work. It is also stated by both the Advocates that said arbitrator has been requesting the parties to appear at New Delhi to proceed with the matter and the learned Advocates appearing for the parties would hasten to add that contract in question related to Bangalore, Hubli and Gulbarga divisions and not only Officers but also entire records relating to said dispute and agreements are situate within the State of Karnataka and as such, for both the parties submit that they would have practical difficulty or there would be administrative constraints to appear at New Delhi and the official who had been appointed as arbitrator would also not be in a position to have sittings of the Arbitral Tribunal at Bangalore on account of his present posting at New Delhi. In other words, arbitrator who had been appointed will not be in a position to arbitrate the dispute on account of his present posting at New Delhi or in other words his absence at Bengaluru. Hence, they submit that his appointment may be terminated and fresh arbitrator be appointed or he be substituted with a new arbitrator. They would also submit that in the light of the dicta laid down by Hon''ble Apex Court in the case of Union of India (UOI) Vs. Singh Builders Syndicate, (2009) 4 CompLJ 447 : (2009) 5 JT 456 : (2009) 4 SCALE 491 : (2009) 4 SCC 523 : (2009) 4 SCR 563 : (2009) AIRSCW 3374 whereunder it has been held that where the Official who has been appointed as arbitrator has been transferred and unable to hold sittings, the Chief Justice or his designate would be empowered to exercise power under Section 11 of the Arbitration and Conciliation Act, 1996 and pass appropriate orders.

It has been held by the Hon''ble Apex Court in the case of SINGH BUILDERS SYNDICATE''S case referred to above, has held as under:

"7. Dealing with a matter arising from the old Act (Arbitration Act, 1940), this Court, in Union of India v. M.P. Gupta [2004 (10) SCC 504 ], held that appointment of a retired Judge as sole Arbitrator contrary to clause 64 (which requiring serving Gazetted Railway Officers being appointed) was impermissible. The position after the new Act came into force, is different, as explained by this Court in Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd., (2008) 3 ARBLR 349 : (2008) 4 CompLJ 39 : (2008) 11 SCALE 500 : (2008) 10 SCC 240 . This Court held that the appointment of arbitrator/s named in the arbitration agreement is not mandatory or a must, but the emphasis should be on the terms of the arbitration agreement being adhered and/or given effect, as closely as possible. It was further held that the Chief Justice or his designate should first ensure that the remedies provided under the arbitration agreement are exhausted, but at the same time also ensure that the twin requirements of sub-section (8) of section 11 of the Act are kept in view. This would mean that invariably the court should first appoint the Arbitrators in the manner provided for in the arbitration agreement. But where the independence and impartiality of the Arbitrator/s appointed/nominated in terms of the arbitration agreement is in doubt, or where the Arbitral Tribunal appointed in the manner provided in the arbitration agreement has not functioned and it becomes necessary to make fresh appointment, the Chief Justice or his designate is not powerless to make appropriate alternative arrangements to give effect to the provision for arbitration.

The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of parties'' choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the dispute, as members in terms of the arbitration agreement, and such Tribunal is made non-functional on account of the action or inaction or delay of such party, either by frequent transfers of such members of the Arbitral Tribunal or by failing to take steps expeditiously to replace the arbitrators in terms of the Arbitration Agreement, the Chief Justice or his designate, required to exercise power under section 11 of the Act, can step in and pass appropriate orders. We fail to understand why the General Manager of the Railways repeatedly furnished panels containing names of officers who were due for transfer in the near future. We are conscious of the fact that a serving officer is transferred on account of exigencies of service and transfer policy of the employer and that merely because an employee is appointed as arbitrator, his transfer cannot be avoided or postponed. But an effort should be made to ensure that officers who are likely to remain in a particular place are alone appointed as Arbitrators and that the Arbitral Tribunal consisting of serving officers, decides the matter expeditiously. Constituting Arbitral Tribunals with serving officers from different far away places should be avoided. There can be no hard and fast rule, but there should be a conscious effort to ensure that Arbitral Tribunal is constituted promptly and arbitration does not drag on for years and decades.

As noticed above, the matter has now been pending for nearly ten years from the date when the demand for arbitration was first made with virtually no progress. Having regard to the passage of time, if the Arbitral Tribunal has to be reconstituted in terms of clause 64, there may be a need to change even the other two members of the Tribunal. The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration. Having regard to this factual background, we are of the view that the appointment of a retired Judge of the Delhi High Court as sole Arbitrator does not call for interference in exercise of jurisdiction under Article 136 of the Constitution of India."

In the light of submission made by learned Advocates as noticed hereinabove and also in the background of law laid down by Hon''ble Apex Court in M/s. SINGH BUILDERS''s case referred to supra, this Court is of the considered view that prayer sought for by the petitioner requires to be granted.

Keeping in mind the principles laid down by Hon''ble Apex Court and taking into consideration that sole arbitrator has been unable to hold sittings of Arbitral Tribunal on account of he having been transferred, substitution of arbitrator is to be made on account of the above stated facts.

Hence, for the reasons aforestated, I proceed to pass the following:

ORDER

"(1) Civil Miscellaneous Petitions are hereby allowed.

(2) Appointment of sole arbitrator (fourth respondent in CMP Nos. 117/2014 and 119/2014 and fifth respondent in CMP No. 118/2014) is hereby terminated.

(3) Sri B. Yoginath, retired District Judge is hereby appointed as an Arbitrator and he shall enter upon reference and conduct proceedings at Arbitration Centre - Karnataka (Domestic and International), Khanija Bhavan, Race Course Road, Bengaluru-560 001 in terms of the Arbitration Centre -Karnataka (Domestic and International) Rules, 2012."