Unison Hotels Pvt. Ltd. vs Value Line Interiors Pvt. Ltd.

Rajiv Shakdher, J.—This is a petition under Section 14(2) read with Sections 25(a) and 32(2)(c) of the Arbitration and Conciliation Act, 1996 (in short ''the Act''). The prayer made in the petition is that this court should intervene under Section 14(2) of the Act and terminate the mandate of respondent No. 3, i.e. the learned arbitrator.

1.1. There are other prayers made as well with regard to the setting aside of the order passed by the learned arbitrator on 16.07.2014 and waiver of cost of Rs. 10,000 imposed by the learned arbitrator vide order dated 16.07.2014, on the ground that he has been rendered functus officio. Briefly, the present proceedings arise in the background of the following broad facts:

"2.1. This court vide order dated 09.10.2012 passed in Arbitration Petition No. 316/2011, appointed Hon''ble Mr. Justice Devinder Gupta, former Chief Justice of Andhra Pradesh High Court, as an arbitrator in the matter.

2.2. Arbitration petition was moved by the respondent, which is the original claimant, in the matter.

2.3. Pursuant to the said order, the learned arbitrator on 28.10.2012 issued a communication directing parties to appear before him on 09.11.2012. It is not disputed by the learned counsel for the petitioner that the petitioner was not represented on that date.

2.4. On the counsel for the petitioner being queried qua this issue, he said that he got in touch with the counsel for the respondent, who assured him that the respondent would not be filing a statement of claim in the matter. The learned counsel for the petitioner emphasizes though, that the hearing fixed on 09.11.2012, was a preliminary hearing.

2.5. Apparently, on 05.02.2013, respondent No. 2, i.e. Delhi International Arbitration Centre (DIAC) wrote to the counsel for the claimant, i.e. the respondent herein, that it should file its statement of claim within 15 days, failing which it would be presumed that it is not interested in proceeding with the matter and, accordingly, the file in the case would be closed.

2.6. I am informed by the learned counsel for the petitioner that the aforementioned letter dated 05.02.2013, was preceded by letters dated 30.10.2012 and 15.12.2012.

2.7. Evidently, the respondent filed the statement of claim on 22.01.2014. Copy of the same was sent to the petitioner by DIAC along with its letter dated 27.01.2014. By this letter, the petitioner was called upon to file its reply/counter-claim within 30 days. The petitioner was also informed that it was required to deposit a sum of Rs. 3,41,513 towards arbitrator''s fee and Rs. 5000 towards miscellaneous expenses. A fee schedule was appended to enable the petitioner to calculate and deposit, if necessary, additional sum towards counterclaim.

2.8. By letter of even date, i.e. 27.01.2014, DIAC informed the respondent that while the statement of claim along with requisite fee and expenses has been deposited, there was a shortfall in deposit of the arbitrator''s fee to the extent of Rs. 70,513. A copy of this letter was marked to the petitioner herein.

2.9. In response to the letter dated 27.01.2014, the petitioner herein through its counsel wrote to DIAC on 27.02.2014 wherein, inter alia, it sought to know whether arbitration proceedings were closed upon failure of the respondent to file its statement of claim for a long period of time."

The DIAC vide letter dated 06.03.2014 responded to the letter dated 27.02.2014, whereby it was indicated that the statement of claim filed by the respondent had been served on the petitioner herein on 31.01.2014 along with a letter dated 27.01.2014. It was indicated that 30 days time was given to the petitioner herein to file its reply/counter-claim, which expired on 02.03.2014. In this letter, what was also put to the petitioner herein was that a further period of 30 days was available till 02.04.2014 subject to payment of cost and explanation for the delay. The petitioner was informed that it had to deposit its share of fee which was a sum of Rs. 2,17,644 along with a sum of Rs. 5,000 towards expenses. It would be seen that fee as demanded earlier was reduced, perhaps on account of recalculation. Fee as per DIAC Rules is based on valuation of claims. In this letter of DIAC, reference was, amongst others, to the letters sent on the subject that is letters dated 13.02.2013, 30.10.2013 and 26.02.2014.

2.1. Be that as it may, in response to the aforementioned letter, the petitioner''s counsel wrote yet another letter dated 29.03.2014 to DIAC. By this letter, he sought, broadly, copies of proceedings from DIAC.

2.2. The letter dated 29.03.2014 was replied by the DIAC vide communication dated 15.04.2014. In this letter, DIAC reiterated that the petitioner was required to deposit the arbitrator''s fee and expenses within 15 days and that if, there is any contention of the petitioner, which impacts any limitation, the same may be placed before the arbitral tribunal. Insofar as the request made for grant of copies of proceedings was concerned, it was stated that since there are no proceedings on record prior to the filing of the statement of claim by the respondent herein, the same could not be supplied.

2.3. The DIAC, followed the aforesaid letter with a letter dated 31.05.2014, whereby the petitioner, as also its counsel, was informed that the next date of hearing before the arbitrator was 16.07.2014 at 11.00 a.m. It is in this background, that on 16.07.2014, the matter was taken up by the arbitrator. It is the order dated 16.07.2014, which is impugned before me.

The learned counsel for the petitioner submits that by virtue of the respondent failing to file a statement of claim within a reasonable period of time, arbitration proceedings stood terminated automatically and, therefore, the proceedings before the learned arbitrator have been rendered infructuous. It is the submission of Mr. Aggarwal, the learned counsel for the petitioner that, therefore, all consequential directions issued at the proceedings held before the learned arbitrator on 16.07.2014, have been rendered infructuous and inefficacious, including the direction whereby, the cost of Rs. 10,000 was imposed on the petitioner.

I have heard the learned counsel for the petitioner. A perusal of the record and the impugned order does reveal that the petitioner has not placed his objections to the continuation of arbitration proceedings in the matter, on account of purported failure of the respondent to file the statement of claim within a reasonable period of time before the learned arbitrator.

There is no doubt in my mind that the arbitrator is empowered to consider such an objection, if raised, under Section 25 of the Act. If, on facts and in the circumstances of a case, the arbitrator comes to the conclusion that the delay in filing the statement of claim is of such a nature that he ought to terminate the proceedings, he would proceed to pass such an order.

5.1. The learned arbitrator in the proceedings of 16.07.2014 has made a specific observation to the effect that the petitioner would be free to take all objections in its statement of defence.

At this stage, the learned counsel for the petitioner says that under Section 14 of the Act, this court should pass an order terminating the mandate of the learned arbitrator.

6.1. In my view, the petitioner, if not more, to some extent, has contributed to the delay in the prosecution of the proceedings or should I say its termination. Mr. Aggarwal, as indicated above, informed the court that the petitioner was not represented before the learned arbitrator, on 09.11.2012, for the reason that the counsel for the opposite side, i.e. the respondent had informed him that the respondent did not intend to file a statement of claim. Mr. Aggarwal says that this assertion is made in the pleadings. There is, undoubtedly, no document placed on record which would show that the respondent''s counsel had made any such representation. Under Rule 3(6) of the DIAC Rules, on a fresh request being made by claimant, the proceedings can be reopened. It appears, on statement of claim being filed, the process, at DIAC''s end, was recommenced.

6.2. The record would show, as indicated above, that the petitioner did not move the learned arbitrator between November 2012 and January 2014 for closure of proceedings. Whether in the given circumstances, the learned arbitrator should terminate the proceedings, is an aspect, that the learned arbitrator may examine on an objection being taken in that behalf.

6.3. In these circumstances, I decline to exercise powers under Section 14 of the Act, at this stage, in the facts of this case as the proceedings before the learned arbitrator have been, so to speak, reignited. The petition and the captioned application are accordingly dismissed.

The petitioner will appear before the learned arbitrator on the designated date, i.e. 31.10.2014 and comply with the directions issued by the learned arbitrator vide order dated 16.07.2014.