Satgur Sewak Rice and General Mills vs Punjab State Civil Supplies Corporation Limited and Another

Iqbal Singh, J.—Petitioner herein through its partner Ram Partap Gupta filed a suit against the present respondents seeking a declaratory decree that the order dated 19.3.1998 passed by respondent No. 2 restoring the case/claim petition of respondent No. 1 against him, which had earlier been dismissed in default on 21.11.1997, is null and void, ab initio and is inoperative and ineffective. The petitioner as a consequential relief also prayed for a decree for permanent injunction against the respondents restraining them from proceeding with the claim petition against him on the basis of the order dated 19.3.1998.

It may be stated at the very outset that arbitration proceedings were going on between the petitioner and respondent No. 1 before respondent No. 2, the arbitrator. The claim was filed before the arbitrator by respondent No. 1. On 2.5.1997, the petitioner filed a written statement of defence before the arbitrator. Replication before the arbitrator was filed by the petitioner. Arbitration proceeding were adjourned to 18.8.1997 for admission and denial of documents. On that date, neither counsel for respondent No. 1 nor its authorised representative appeared before the arbitrator and the matter was, therefore, adjourned to 8.9.1997. The matter was again adjourned to 11.9.1997, but again none appeared on behalf of respondent No. 1 and the arbitration proceedings were adjourned to 19.9.1997. That day also, none appeared on behalf of respondent No. 1 and the proceedings were adjourned to 12.11.1997 when notice was ordered to be issued to the counsel for respondent No. 1 and the Secretary of respondent No. 1. On 12.11.1997 as well, the position remained the same and the matter was adjourned to 21.11.1997 for which last opportunity was granted for the appearance of respondent No. 1. On 21.11.1997 also, none appeared on behalf of respondent No. 1. The arbitrator, therefore, dismissed the arbitration proceedings in default. On 13.1.1998, respondent No. 1. filed an application for restoration of the arbitration proceedings before the arbitrator. The arbitrator issued noticed of the application to the petitioner and the latter filed reply stating that the mandate of the arbitrator already stood terminated and therefore, the arbitration proceedings could not be restored. This objection was however, over ruled by the arbitrator who revoked and recalled his order dated 21.11.1997 and restored the arbitration case by his order dated 19.3.1998.

Suit was contested by respondent No. 1 who denied that with the dismissal in default of the arbitration proceedings, the mandate of the arbitrator stood terminated or that the arbitrator had no jurisdiction to restore the arbitration proceedings dismissed in default.

Along with the suit, the petitioner also filed an application under Order 39 Rules 1 and 2 of the Code of Civil Procedure. The application was resisted and after hearing the counsel for the parties, trial Court dismissed the application and the appeal there against was also dismissed by learned District Judge, Chandigarh by its order dated 11.12.1998.

The only question which falls for determination by this Court in the above circumstances is, whether the arbitrator was competent to review/recall its earlier order dismissing the arbitration proceedings in default and thereby restore the same on an application moved by respondent No. 1.

Section 25 of the Arbitration and Conciliation Act, 1996, reads as under:-

"25. Default of a party.- Unless otherwise agreed by the parties, where, without showing sufficient cause -

(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of Section 23, the arbitral tribunal shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence in accordance with sub-section (1) of Section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant;

(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it."

A perusal of the above provisions goes to show that the arbitration proceedings could not be dismissed in default and the arbitrator was required to make the award on the evidence available before it as provided in sub-section (c) of Section 15 ibid. Since there is no provision in the Act which may provide that the arbitration proceedings can be dismissed on a failure of a party to appear at an oral hearing or to produce documentary evidence, the order dated 21.11.1997 whereby the arbitration proceedings initiated by respondent No. 1, was itself illegal. Learned counsel for the petitioner contended that once the arbitration proceedings had been dismissed in default, the arbitrator had no power to review its earlier order and restore the same and, therefore, the order restoring the said proceedings was illegal.

Section 19 of the Act provides as under:-

"19. Determination of rules of procedure.- (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1980 or the Indian Evidence Act, 1872.

(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.

(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence."

It is not shown that the parties had agreed to any procedure to be followed by the arbitrator and as such the arbitrator was justified to conduct the proceedings in the manner he considered appropriate.

Learned counsel for the petitioners further submitted that in view of the provisions of sub section (c) of Section 25, the arbitrator could not first dismiss the arbitration proceedings in default and then to restore the same by recalling his earlier order. But I do not find any force in the submission. If the arbitrator could not dismiss the proceedings in default, he was obviously required to make the award on the basis of the material available before it and in that eventuality he was further required to proceed further with the case to make the award on the day when the order of dismissal in default was made, because the proceedings were fixed for admission and denial of documents by the parties on that day, and on the failure of respondent No. 1 or its authorised representative to appear the arbitrator, the proceedings were dismissed in default. No doubt, after the dismissal of the proceedings in default, the order dated 21.11.1997 was recalled on an application moved by respondent No. 1 and the proceedings were again started. Nothing wrong could be found with the order restoring the arbitration proceedings which was passed on equity. No prejudice is shown to have been caused to the petitioner with the restoration of the proceedings which were dismissed in default on the failure of respondent No. 1 to appear in the arbitration proceedings. In the absence of any specific provision mentioned in the Act empowering the arbitrator to dismiss the arbitration proceedings in default and in regard to restoration thereof on an application moved by the claimant in the proceedings, and further in the absence of any agreement between the parties that the arbitrator shall follow any particular procedure, there was nothing wrong with the order of restoration of the proceedings because in view of provisions of Section 19 ibid, if the parties fail to arrive at an agreement about the procedure to be followed by the arbitrator in conducting the proceedings, the arbitrator was free to conduct the same in the manner it considered appropriate.

Once there was nothing wrong with the order restoring the arbitration proceedings, the petitioner had no prima facie case for the grant of an order of injunction as prayed for in its application under Order 39 Rules 1 and 2 of the Code and the Courts below, in my opinion, have, therefore, rightly refused to exercise their discretion in that behalf, especially when it is not shown that any irreparable loss would be caused to the petitioners in case the interim injunction is not granted. The revision petition has thus no merit and the same is consequently dismissed. Nothing said herein shall however, influence the mind of the trial Court on the merits of the controversy raised in the suit.