14 October 2019


Judgments

High Court of Bombay

Ramesh D. Shah and Ors. Vs. Tushar D. Thakkar and Ors.

MANU/MH/3067/2017

30.12.2017

Arbitration

Arbitrator has power to recall his earlier order of termination of proceedings if sufficient cause is shown by claimant

By present petition, the Petitioners have prayed for condonation of delay, in filing petition and prays that, the Procedural Order Sheets passed by the learned arbitrator thereby terminating the arbitral proceedings and refusing to take statement of claim on record by condoning the delay in filing the statement of claim and for recalling of the order terminating the arbitral proceedings be set aside. The Petitioners have also prayed for an order and direction against the learned arbitrator to accept the statement of claim along with annexures filed by the Petitioners with the learned arbitrator.

Petitioners had invoked arbitration agreement, the Respondents refused to refer the dispute to arbitration. There was further correspondence exchanged between the parties insofar as invocation of arbitration agreement is concerned. The Petitioners thereafter preferred an application under Section 11(6) of the Arbitration & Conciliation Act, 1996. Accordingly, a sole arbitrator was appointed. It is submitted by the Petitioners that, learned arbitrator failed to communicate to the Petitioners that, he had intended to terminate the mandate/arbitral proceedings and also failed to consider the reasons shown by the Petitioners for extension of time in impugned order passed on the Petitioners' application. Further submission that, the learned arbitrator could have imposed adequate compensation for default in filing the statement of claim on time instead of non-suiting the Petitioners completely.

The learned arbitrator has power to recall his earlier order of termination of proceedings on the ground that, the statement of claim was not filed within the time granted by the learned arbitrator as fixed by Section 23(1) of Act, if sufficient cause is shown by the claimant even after termination of the proceedings and in that event the statement of claim can be accepted by the arbitral tribunal by accepting the show cause and such order of recall would not be beyond the jurisdiction of the arbitral tribunal on sufficient cause being shown.

Impugned orders passed by the learned arbitrator in present case indicates that, the learned arbitrator did not look into sufficient cause shown by the Petitioner in the two letters addressed by the Petitioner seeking extension of time and also in the application for condonation of delay in filing the statement of claim mentioned in the application for recall of the order passed by the learned arbitrator which came to be rejected by the learned arbitrator vide order date 16th March, 2016. Learned arbitrator ought to have considered the cause shown by the Petitioner for seeking extension of time and also for recalling of the order terminating the arbitral proceedings before rejecting the said application.

Learned arbitrator did not put the Petitioner to notice that such extension granted by the learned arbitrator was final extension and no further extension would be granted in any circumstances. Arbitrator did not render any reasons while rejecting the application for extension of time for the second time and did not render any finding as to whether the cause shown by the Petitioner for further extension of time and for condonation of delay in filing the statement of claim was sufficient cause or not. Arbitrator ought to have given an opportunity of being heard to the Petitioner before passing any drastic order of termination of proceedings thereby terminating his own mandate.

In present case, the Petitioner had sought six weeks extension of time to file statement of claim initially. Without rendering any reasons, learned arbitrator however, initially granted only three weeks extension to file statement of claim. The Petitioner gave certain reasons in the application for further extension of time and gave additional reasons in the application for seeking condonation of delay in filing the statement of claim and for recall of the order passed by the learned arbitrator.

A perusal of the statement of claim filed by the Petitioner indicates that, the Petitioner has placed reliance on the report of the Chartered Accountants. The Petitioner had conveyed that, computation of claim is complex and requires a thorough analysis by the Chartered Accountants. The Petitioner has annexed the reports submitted by the Chartered Accountants in support of its claim filed before the learned arbitrator as it is apparent from a copy of the statement of claim with annexures annexed to the arbitration petition which refers to such report. It is also not in dispute that, within nine days of the learned arbitrator terminating the proceedings, the Petitioner had filed the statement of claim along with annexures with the learned arbitrator.

It is not the case of the Respondents that, under the arbitration agreement, the Petitioner was required to submit a summary of claim including proof in support of such claim in the notice invoking arbitration agreement. The petitioner has made huge claim for damages against the Respondents and to prove such claim for damages and other claims made before the learned arbitrator, the Petitioner was placing reliance upon the report of the Chartered Accountants. Proof has to be furnished by the Petitioner only at the stage of filing of statement of claim and could not have been furnished, when the arbitration agreement was invoked by the Petitioner.

If the Petitioner has satisfied the test laid down under Section 14(2) of the Arbitration Act and if the Court is satisfied that, the learned arbitrator could not have terminated the proceedings judiciously which resulted in termination of mandate, such orders can be set aside under Section 14(2) of the Arbitration Act and can be substituted by another order. Learned arbitrator could have imposed a reasonable cost upon the Petitioner and ought to have accepted the statement of claim along with the documents on record instead of terminating the proceedings. Impugned orders are set aside. The arbitral proceedings are restored to file before the learned arbitrator.

Tags : Arbitral proceedings Termination Validity

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