In Karnataka State Road Transport Corporation vs. M. Keshava Raju, MANU/KA/0732/2003 : AIR 2004 Kant 109, the Karnataka High Court, considering the scope and ambit of Section 4 of the Act of 1996, regarding waiver of right to object, observed thus:-
"Section 4 narrates the circumstances in which the party, who knowingly fails to object the non-compliance of any non-mandatory provisions of Part-I or any requirement under the arbitration agreement by the other party, is deemed to have waived his right to object. This Section is based on general principles such as "estoppel" or "venire contra factum proprium". It is intended to help the arbitral process function efficiently and in good faith. If there is non-compliance of any non-mandatory provision of Part I or of any requirement of the arbitration agreement by a party to an arbitration agreement of which the other party to the agreement though has the knowledge of such non-compliance but does not object without undue delay, or if a time limit is provided for stating that objection and no objection is taken within that period of time, such a party later on can neither raise objection about that non-compliance of any provision of Part I nor any requirement of the arbitration agreement since such party shall be deemed to have waived its objection. Though, in order to apply the doctrine of waiver by invoking Section 4, the first condition is that the non-compliance must be of non-mandatory provision of Part I or of any requirement under the arbitration agreement, certain mandatory provisions of the Act also provide for a grant of waiver in the event of failure to object. For example, sub-sections (2) and (3) of Section 16 are one of such mandatory provisions. Section 16(2) of the Act provides that a plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. Section 16(3) of the Act provides that a plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings."
27. Keeping in view the guiding principles of law enunciated by various Courts, a careful scrutiny of Sections 12, 13, 14 and 15 of the Act of 1996 in juxtaposition within the facts of this case, shows that there does not exist any circumstance, which may warrant termination of mandate of the arbitrator in the present case. On the facts as have been analyzed above, the matter was taken up by learned Arbitrator on 01.12.2015, soon after expiry of ten months on 11.11.2015, in which proceedings the applicant participated, it would be deemed to have waived its right to object continuation of the arbitrator in terms of Section 4 of the Act of 1996. Section 4 of the Act of 1996, provides for waiver of right to object that if a party, who knows that (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration, without stating his objection to such noncompliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. The said provision fully applies to the facts of the present case. The applicant knew when the arbitral proceedings were taken up by the learned Arbitrator in this case on 01.12.2015, that period of ten months had already expired, even then, it consented to continuance of arbitral proceedings by the sole Arbitrator. Since the applicant did not raise objection as to continuance the same before 11.11.2015, the day when the tenth month expired, it shall be deemed to have waived its right to so object.
28. In view of the facts and law, as discussed above, the principle of waiver would apply with full force in the present case. The right to object the continuance of the proceedings on the ground of expiry of the stipulated period falls in Part-I of the Act, which is derogable. The object of providing time limit for rendering an Award by the Arbitrator is aimed at expeditious resolution of the disputes rather than' to leave the disputes unsettled or inconclusive on the expiry of the stipulated period. The principle of waiver as is enshrined in Section 4 of the Act of 1996 would therefore apply against the applicant in the present case. In totality of the circumstances, therefore, the applicant would be deemed to have waived its right to object to continuance of the arbitral proceedings and the arbitrator, to resolve the dispute between the parties. Therefore, mandate of the arbitrator cannot be terminated merely because the arbitral award was not rendered within ten months. IN THE HIGH COURT OF RAJASTHAN (JAIPUR BENCH)
S.B. Arbitration Application No. 62/2016
Decided On: 25.11.2016
Guru Kripa HP, HPC Petrol Pump
Vs.
Hindustan Petroleum Corporation Ltd. and Ors.
Hon'ble Judges/Coram:
Mohammad Rafiq, J.
Citation:AIR 2017(NOC)474 Raj
Citation:AIR 2017(NOC)474 Raj
1. This application under Sec. 11(5) and (6) read with Sections 12, 14 and 15 of the Arbitration and Conciliation Act, 1996, has been filed by M/s. Guru Kripa HP, HPC Petrol Pump, Jaipur, praying for termination of the sole arbitrator Smt. Rajni Mehta, Deputy General Manager (Sustainability), appointed by the respondent Hindustan Petroleum Corporation Limited. Skeleton facts essential for deciding present application are that the application is a partnership firm registered under the Indian Partnership Act. It has approached this Court through its one of the partners Mr. Manmohan Kumbhaj. The applicant firm was allotted a retail outlet of the respondent Hindustan Petroleum Corporation Limited (for short, 'the respondent Corporation') on the land owned by the partners of the applicant firm, situated at Plot No. 9, Vishwa Karma Industrial Area Jaipur. An agreement was executed between the parties on 08.04.2010. The applicant started operation of the retail outlet on 26.05.2009. Allegation of the applicant is that the officers of the respondent Corporation approached its outlet for taking samples of the High Speed Diesel (for short, 'the HSD'). The samples were taken by them without complying with the mandatory provisions of law and after taking the samples of the HSD in eight aluminium containers (four samples from each of the HSD tank), at the relevant time, they decided to take samples of Motor Spirit (for short, 'the MS') also, but having realized that they did not have any spare container, they took the samples of the MS in the aluminium bottles. Thus out of 8 containers, four of the aluminium bottles were used in taking samples of the HSD, whereas the remaining four bottles were used for taking samples of the MS. The samples were taken in hot haste and cursory manner without taking precautions as required under the law and without following the procedure prescribed by the Ministry of Petroleum and Natural Gasses for this purpose.
2. Case of the appellant is that the respondent did not comply with the provisions of the Motor Spirit & High Speed Diesel (Regulation of Supply & Distribution and Prevention of Malpractices) Order, 2005 (for short, 'the MS & HSD Order 2005'), as thereunder the respondent was required to take six samples of MS and three samples of the HSD from each of the storage tank. Reference is made to Clauses 7 and 8 of the MS & HSD Order 2005. The representative of the respondent also collected the truck tanker retention samples of the supplies of dt. 31.08.2010 and 01.09.2010 from the retail outlet of the applicant. Five thousand liters of the MS was supplied at the retail outlet of the applicant on 31.08.2010, whereas four thousand liters of MS was supplied on 01.09.2010. The total MS available in the stock of the applicant was 7300 liters. The applicant has only one underground tank for storage of MS, in which all supplies are received and stored for the purpose of sale. The total capacity of underground MS tank at the retail outlet of the applicant is 22000 liters and at the time of taking samples, a quantity of about 6500 liters of MS was available in the tank. No intimation was furnished to the applicant about the test result of the samples. To the utter shock and surprise and dismay of the applicant, the respondent issued show cause notice to the applicant on 03.11.2010, much after the expiry of prescribed time limit, calling upon the applicant to show cause as to why action may not be taken against it under Clauses 26, 42, 55(1) and 55(k) of the Dealership Agreement dt. 08.04.2010. Copy of the inspection report dt. 04.09.2010 and laboratory report dt. 09.09.2010 were also enclosed with the cause-cause notice. It was alleged in the show cause notice that as per the laboratory report, the final boiling point of the petrol sample drawn from the retail outlet on 04.09.2010 was found to be 223°C against the supply location final boiling point of 184°C and T.T. Retention final boiling point of 187° C, whereas the maximum value of final boiling point was stated to be 201°C as per BIS 2786:2008. The show cause notice further alleged that as per the laboratory report the sulphur contents in the petrol samples taken from the retail outlet, were found to be 82 PPM as against the supply location content of 42 PPM and T.T. Retention samples of 55 PPM, which was also outside the permissible limits.
3. The show cause notice dt. 03.11.2010 was handed over the applicant by hand and simultaneously the sales and supplies of the retail outlet were suspended by the respondent on the same day by intimating the applicant in this behalf. The applicant was called upon to submit its reply within a period of ten days from the date of receipt of the notice. According to the applicant, the samples of MS and HSD taken by the authorized officers of the respondent from the applicant's outlet, were required to be sent to any of the laboratory mentioned in Schedule III but a bare perusal of the laboratory report would show that the samples were not tested in any of the laboratories mentioned in the Schedule III appended to the MS & HSD Order 2005. A bare perusal of the laboratory report would show that samples were not tested in any of such Laboratories. In fact, the samples in question were tested in the laboratory situated at Saradhana (Ajmer), which is virtually under the control of the office, which had taken the samples. Such a report can therefore have no sanctity in the eyes of law. The applicant in these circumstances requested the respondent to send second sample to other authorized laboratory so that genuineness of the test result can come on record. The respondent did not pay any heed to the request of the applicant. The applicant, however, on its own, got the second sample tested from the authorized laboratory i.e. Shriram Institute of Industrial Research, Delhi, wherein the contents of MS were found strictly in consonance with the specifications.
4. As soon as the show cause notice was received by the applicant, it filed an application under Sec. 9 of the Arbitration & Conciliation Act, 1996 (for short, 'the Act of 1996'), seeking interim relief and measures before the Principal Civil Court. The said application was, however, rejected by that Court vide order dt. 18.11.2010. The applicant preferred an appeal against the said order before this Court, being S.B. Civil Miscellaneous Appeal No. 603/2011, which came be dismissed by this Court vide order dt. 23.01.2011 with the observation that the applicant can avail remedy of appeal against the order of termination of dealership agreement dt. 01.02.2011 and also invoke arbitration clause, and those proceedings will not be influenced in any manner by order passed by this Court. The applicant therefore filed an appeal before the Executive Director of the respondent, which was dismissed vide order dt. 27.06.2011 That order has also been separately challenged by the applicant before this Court by filing S.B. Civil Writ Petition No. 8718/2011, which is pending decision before this Court. The applicant then moved an application under Sec. 11 of the Act of 1996 before this Court in view of the arbitration clause 66 of the dealership agreement dt. 08.04.2010, which was registered as Arbitration Application No. 66/2011. The said application was dismissed by this Court on the premise that the applicant has not first approached the respondent invoking the arbitration clause. This Court, vide order dt. 19.09.2014, granted liberty to the applicant to raise dispute with respondent and to make a request to respondent to refer the case for arbitration and further liberty was granted that on nomination of arbitrator if the applicant feels aggrieved, it would have a liberty to raise objection as per provisions of the Act of 1996. It was made clear that dismissal of the application would not come in the way of the applicant for doing so. In view of the direction of this Court, the applicant approached the respondent for referring the dispute to the arbitrator as per Clause 66 of the dealership agreement.
5. Mr. L.L. Gupta, learned counsel for the applicant argued that the applicant vide notice dt. 13.11.2014 approached the respondent for referring the dispute to arbitrator as per Clause 66 of the dealership agreement. The respondent No. 1 therefore referred the dispute for decision to the sole arbitrator. Learned counsel argued that Clause 66 of the dealership agreement contained specific provision that arbitrator appointed in this clause, has to pass the award within six months from the date he/she enters upon the arbitration proceedings. The period of six months so provided can be extended for a maximum period of four months thereafter. The respondent, while referring the dispute to the sole arbitrator Mrs. Rajni Mehta, Deputy Director, specifically directed her to pass an award in terms of the dealership agreement dt. 08.04.2010 and as per the provisions of the Act of 1996 as also other applicable laws. The respondent No. 2, sole arbitrator appointed by the respondent No. 1, entered into the arbitration proceedings on 12.01.2015 while issuing notice for appearance of the applicant and respondent No. 1. The notice dt. 12.01.2015 was issued for appearance on 05.02.2015. The sole arbitrator decided the procedure to be followed in the arbitration. The arbitration proceedings commenced on 12.01.2015 when the show cause notice for putting appearance was issued by the learned Arbitrator but it is unfortunate that despite expiry of limited period of six months and even after expiry of further period of four months, thus total ten months, sole arbitrator appointed by the respondent No. 1, failed to pass award in terms of Clause 66 of the dealership agreement. Even though, the sole arbitrator has held several meetings but she failed to pass final award, and the arbitrator has passed the order in the shape of interim award on 04.07.2016 after expiry of ten months, which shows total lack of skill and knowledge on her part to discharge duties as an arbitrator.
6. Learned counsel submitted that the Act of 1996 has now been amended by the Act No. 3 of 20016, which has been made effect from 23.10.2015. As per the amended Act, a person is disqualified in discharging the duties of arbitrator if he falls in any of the categories specified in Fifth and Seventh Schedule appended to the Act of 1996. The respondent No. 2 has failed to discharge the function within stipulated period of time as per Clause 66 of the dealership agreement and therefore she has lost the right to continue as arbitrator. Her mandate therefore deserves to be terminated and an independent arbitrator should be appointed to replace her.
7. Mr. L.L. Gupta, learned counsel for the applicant argued that though initially the applicant gave consent for continuance of the arbitration proceedings under an impression that the respondent No. 2 will discharge arbitration proceedings in an independent manner without being influenced from the fact that she is employee of the respondent No. 1. However, the manner of proceedings and behavior of respondent No. 2 and fact that whatever proceedings were being conducted by her in a prejudicial manner to the applicant and with a clear intention to favour the respondent No. 1. The award was not passed within the time just to prolong the matter to save the respondent No. 1 from any legal action. While Entry 5 of the Fifth Schedule provided that the fact that the Arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration, would give rise to justifiable doubts as to his/her independence or impartiality. Section 12(5) of the Act of 1996 provides that notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. Entry 1 of Seventh Schedule in this connection refers to such relationship which debars a person to act as arbitrator, namely, if he is an employee, consultant, advisor or has any other past or present business relationship with a party and Entry 5 of the Seventh Schedule disqualifies a person if he/she is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
8. Mr. L.L. Gupta, learned counsel for the applicant argued that the applicant had merely produced copy of the Arbitration and Conciliation (Amendment) Ordinance, 2015 on 01.12.2015 and submitted that this Ordinance is effective from 23.10.2015 and not applicable on the arbitrators who have already been appointed before the Ordinance came into force. But then, binding provision contained in Section (1)(b) read with Entries 1 and 5 of the Fifth Schedule and Section 12(5) read with Entries 1 and 5 of the Seventh Schedule, would nonetheless debar continuation of the Sole Arbitrator. Any admission against the Statute does not bind the applicant for there can be no estoppel against the Statute. Even otherwise, it was in that limited context that consent was given for non applicability of the Arbitration and Conciliation (Amendment) Ordinance, 2015, which later became Arbitration and Conciliation (Amendment) Act, 2015. This cannot be construed as consent on the part of the applicant for the arbitrator to continue to act as arbitrator to adjudicate the difference or dispute between the parties.
9. Mr. Sudhanshu Kasliwal, learned counsel for the respondents, opposed the application and submitted that the applicant before approaching this Court, submitted application before the learned Arbitrator on 18.07.2016 on the ground that maximum period of ten months envisaged in Clause 66, supra, has expired and therefore she cannot now render the award. The said application was contested by the respondent No. 1. Their oral arguments were heard on 23.08.2016. Learned Arbitrator, vide order dt. 19.09.2016, rejected the said application. Since the order dt. 19.09.2016 has not been challenged anywhere and has attained finality, therefore the present application deserves to be rejected. It is denied that mandatory provisions of law and norms were not complied with by the representatives of the respondent No. 1 while taking samples of the retail outlet of the business. It is denied that the action was taken in the hot haste and cursory manner. In fact, samples were taken in rinsed containers and were duly labelled as per prescribed procedure of MOPNG. Bare perusal of report of the inspection dt. 04.09.2010 submitted by the Inspecting Officer, shows that the he took total six samples of MS, out of which four were retained with the Area Sales Manager and two samples of MS were handed over to the dealer for safe custody. With regard to HSD, three samples of HSD, each from tank 1 and tank 2, were taken, out of which two samples of each HSD were handed over to the dealer. Three tier sampling procedure, so followed by the Inspecting Officer, was in line with the procedures laid under the guidelines of Marketing Discipline Guidelines, 2005. It is submitted that the Marketing and Refining Laboratories of the respondent No. 1 are authorized laboratories for testing of petroleum product samples. The Saradhana (Ajmer) Marketing Terminal Laboratory is also an authorized laboratory under MS & HSD Order 2005. Reference in this connection is made to Clause 8(4) of Schedule III of the MS & HSD Order 2005. Request letter dt. 03.02.2011 sent by the applicant for retesting of the sample was an afterthought. In fact, after receipt of the laboratory report, a show cause notice dt. 03.11.2010 along-with said report was served upon the applicant and its reply dt. 29.11.2010 was submitted to the said notice. The applicant did not submit any request for retesting of the samples retained by him in the reply aforesaid or even before issuance of termination order dt. 01.02.2011. Request letter of the applicant as received by the respondent No. 1 only on 04.02.2011, which is after issuance of the termination order.
10. Mr. Sudhanshu Kasliwal, learned senior counsel for the respondents, referred to the order passed by the Sole Arbitrator dt. 01.12.2015 and submitted that representative of the applicant, who appeared before learned Sole Arbitrator on that date, produced copy of the Arbitration and Conciliation (Amendment) Ordinance, 2015 and stated that the Ordinance is effective from 23.10.2015 and that the same is not applicable on arbitrators who have already been appointed before the Ordinance came into force. The arbitrator then has stated that both the parties have consented to the arbitration proceedings continuing and the sole arbitrator to continue to adjudicate the difference and disputes between the applicant and respondent No. 1. The arbitrator also observed with reference to Para 41 of the statement of claim and page 17 of the reply to the statement of claim, that the claimant has stated that he has raised no objection with regard to appointment of arbitrator. Learned senior counsel therefore submitted that once the applicant participated in the arbitral proceedings after expiry of period of ten months and also consented to continuation of the arbitral proceedings, and of the sole arbitrator to adjudicate the difference and dispute between the parties, it is now not open for him to resile from that stand and object to continuation of sole arbitrator.
11. Learned senior counsel in this connection referred to Section 4 of the Act of 1996, and argued that if there is non-compliance of any non-mandatory provision of Part I or of any requirement of the arbitration agreement by a party to an arbitration agreement of which the other party to the agreement though has the knowledge of such non-compliance but does not object without undue delay, or if a time limit is provided for stating that objection an no objection is taken within that period of time, such a party shall be deemed to have waived his right to object. Learned senior counsel, in support of his argument, has relied on the judgment of the Supreme Court in N.B.C.C. Limited vs. J.G. Engineering Pvt. Ltd., MANU/SC/0013/2010 : (2010) 2 SCC 385 and that of the Bombay High Court in Jayesh H. Pandya and Another vs. Subtex India Limited and Ors., MANU/MH/0963/2008 : 2008 (Suppl. 2) Arb. LR 328 (Bombay).
12. I have given my anxious and thoughtful consideration to rival submissions and perused the material on record.
13. Sheet anchor of the argument of the applicant is that since Clause 66 of the agreement provided a time limit of six months for passing of the award, after entering upon the reference or within such extended time not exceeding further four months, thus total period of ten months, and the Arbitrator, having entered proceedings on 12.01.2015, failed to render the award till 11.11.2015, she has forfeited the right to continue as such Arbitrator and therefore her mandate is liable to be terminated in view of Sections 14 and 15 of the Act of 19%. Objection as to continuation of the sole arbitrator is also founded on Entry 1st and 5th of Schedule V and VII appended to the Act of 19%. Section 12(1)(b) of the Act of 1996 provides that when a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances, which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. The Explanation, 1 thereto stipulates that the grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. While Entry 1 of Fifth Schedule provides that if the arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party, it shall give rise to justifiable doubts as to his/her independence or impartiality to act as an arbitrator. Similarly, according to Entry 5 of Fifth Schedule, the justifiable as to independence and impartiality of the arbitrator would arise if the arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
14. Indisputably, arbitration proceedings in the present case had commenced much prior to enforcement of Amendment Act of 2015. The Arbitration and Conciliation (Amendment) Ordinance, 2015 was published in the official Gazette on 23.10.2015. This Ordinance later on became the Amendment Act of 2015. Significant changes were brought about thereby in the Act of 1996, especially by substitution of Section 12(1) and Section 12(5) as also insertion of Fourth and Seventh Schedules to the Act w.e.f. 23.10.2015. Article 1 of the Seventh Schedule to the Amendment Act of 2015 makes a serving officer of an organisation ineligible to act as arbitrator. Fifth Schedule to the Amendment Act of 2015 narrated circumstances giving rise to justifiable doubts, listing out as many as 34 parameters in great detail and in a more explicit manner, while Sixth Schedule provided the form in which the disclosure is to be made by the proposed Arbitrator. No doubt, Section 12(5) of the Amendment Act of 2015 begins with a non-obstante clause and overrides any prior agreement between the parties, but this has to be viewed in the facts of the present case and law available on the subject.
15. Section 21 of the Act of 1996 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. In the present case, not only request was received by the respondents but arbitration proceedings actually commenced by appointment of arbitrator by the respondent-Corporation much prior to enforcement of the Amendment Act of 2015 and more particularly amended provision of Section 12(1), Section 12(5) and Fifth and Seventh Schedules in the Act came into force much thereafter w.e.f. 23.10.2015.
16. The Supreme Court in ACC Ltd. (supra) held that further application under Sec. 11 cannot be entertained where there has been compliance with the procedure for appointment of a substitute arbitrator. It has been specifically stated in proviso to Section 12 of the Amended Act that where an arbitrator has already been appointed on or before the commencement of the Arbitration and Conciliation Amendment Act, 2015, then in that eventuality sub-Section 5 of Section 12 would not be applicable.
17. Simultaneous reading of Section 26 of the Amendment Act of 2015 and Section 85(2)(a) of the Principal Act would show that both are couched in the similar language. The Supreme Court in State of West Bengal vs. Amritlal Chatterjee, MANU/SC/0682/2003 : (2003) 10 SCC 572 had an occasion to construe Section 85(2)(a) of the Principal Act. The facts in that case were that the respondent contractor sought reference for adjudication of dispute regarding payment of additional work. Consequently, an arbitrator was appointed by the Chief Engineer on 07.09.1994. When the arbitrator failed to give the award for a considerable period of time, the respondent filed an application under Secs. 5, 11 and 12 of the Arbitration Act, 1940 for appointment of a new arbitrator, which was allowed by the learned Single Judge of the High Court. This was objected to by the State which challenged the said order in appeal before the Supreme Court. Dismissing the appeal filed by the State, the Supreme Court in Para 4, 5, 6, 7 and 14 of the report observed thus:-
"4. If may be noticed that the earlier arbitrator was appointed by the Chief Engineer on 7.9.1994 under the Arbitration Act, 1940. The new Act came into force with effect from 25.1.1996. Section 21 of the new Act provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Clause (a) of sub-section (2) of Section 85 of the new Act provides that notwithstanding repeal of the Arbitration Act, 1940, the provisions of the said enactment shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force.5. On the arguments of the learned Senior Counsel for the appellant, the question that arises is as to when the proceedings commence.6. In Shetty's Constructions Co. (P) Ltd. vs. Konkan Rly. Construction, MANU/SC/1070/1998 : (1998) 5 SCC 599 it was held that the arbitration suit in respect of arbitration dispute shall be deemed to have commenced on the date on which the request for referring the dispute for arbitration is received by the respondent.7. Thyssen Stahlunion GMBH vs. Steel Authority of India Ltd., MANU/SC/0652/1999 : (1999) 9 SCC 356 which was passionately relied upon by the learned Senior Counsel for the appellant, has, in our view, no application to the facts of the Present cases. The Bench concluded:"1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (Arbitration and Conciliation Act, 1996).2. The phrase 'in relation to arbitral proceedings' cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the Court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Sec. 17 thereof and also appeal arising thereunder."There cannot be any doubt that invoking the arbitration clause by a party and appointment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of sub-Section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in Court.***14. Furthermore, Section 85(2)(a) of the new Act may have to be construed keeping in view the provisions contained in Section 21 of the new Act."
18. In my considered opinion, interpretation placed on Section 85(2)(a) of the Act of 1996 can safely be extended to provisions of Section 26 of the Amendment Act of 2015. Section 21 of the Act of 1996 similarly provides that the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. In the present case not only dispute was referred, but the arbitrator was appointed. In that situation, the respondents could have legitimately appointed, and have indeed appointed, the sole arbitrator and they can, in the meaning of Section 15(2) be held to have acted in accordance with the rules applicable at the time of appointment of original arbitrator. Notwithstanding what is provided in Section 12(5) and Entry 1 and 5 of Schedule Fifth and Seventh of the Amendment Act of 2015, appointment of arbitrator made by the respondents cannot be faulted and her mandate cannot be ordered to be terminated. Doing so would amount to violation of parameters contained in Section 26 of the Amendment Act of 2015, which has kept the pending arbitral proceedings out of the bounds of Amendment Act of 2015. It is cardinal rule of interpretation of statute that when language of a statutory provision is clear and unambiguous, full effect must be given to it irrespective of the consequences. The Courts are not meant to legislate, their function is to interpret the law as enacted by the Legislature.
19. Let me now advert to the argument that after expiry of the period of ten months i.e. initial six months and thereafter, extended four months, up to which time the period for delivery of award could be extended, the arbitrator cannot be allowed to continue and her mandate as arbitrator is liable to be terminated. In order to appreciate this argument, it would be apposite to reproduce relevant part of Clause 66 of the business agreement, which reads as under:-
"66. Any dispute or difference of any nature whatsoever or.......xxxxxxxxxxxxxxxThe award shall be made in writing within six months after entering upon the reference or within such extended time not exceeding further four months as the sole arbitrator shall by a writing under his own hands appoint."
20. The argument aforesaid has to be considered in the light of facts of the present case, particularly the fact that the representative of the petitioner himself brought to the notice of the arbitrator a provision introduced vide Arbitration and Conciliation (Amendment) Ordinance, 2015 and yet consented to continuance of the arbitral proceedings as also the arbitrator, to adjudicate the difference or dispute between the applicant and respondent, which would be evident from the following extract of the order-sheet drawn by learned Arbitrator on 01.12.2015:-
"The claimant has produced copy of the Arbitration and Conciliation (Amendment) Ordinance, 2015 and have stated that the ordinance is effective from 23.10.2015 and that the same is not applicable on arbitrators who have already been appointed before the ordinance came into force, both the parties have consented to the arbitration proceeding continuing and the Sole Arbitrator to continue to adjudicate the difference and disputes between Claimant and Respondent. With reference to Para 41 of the State of Claim and w.r.t. Page 17 (Annexure R11) of the Reply to the statement of claim of the Respondent, the Claimant has stated that he has raised no objection w.r.t. Appointment of arbitrator and it is his apprehension because his appeal has been decided by ED (Retail).The Claimant are directed to submit written arguments on next date of hearing with a copy to the Respondent. The next date of hearing is being scheduled on 05/01/2016 at 11 AM at same venue for oral arguments of the Respondent."
21. Having given unequivocal consent to continuation of arbitral proceedings and also of the respondent No. 2 as arbitrator, to adjudicate difference or dispute between the parties, it does not now lie in the mouth of the applicant to contend that it has not waived the objection as to continuation of the said arbitrator. The contention that even if the applicant at that stage on 01.12.2015, had given the consent, it could at any later point of time revoke or withdraw that consent and further contention that once the applicant did so, the sole arbitrator lost her authority to continue to adjudicate the difference/dispute between the parties, is noted to be rejected. Reference in this connection may be made to the relevant provisions i.e. Section 14 and 15 of the Act of 1996, which have been relied on. Section 14 of the Act of 1996, as amended by the Act of 2015, provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if he becomes de jure or de facto unable to perform his functions or for other reasons, fails to act without undue delay; and (b) he withdraws from his office or the parties agree to the termination of his mandate. Sub-Section (2) of Section 14 of the Act of 1996 provides that if a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. In the facts of the present case, it cannot be said that the arbitrator has become de jure or even de facto unable to perform his functions or failed to act without any undue delay for any other reason. Section 15 of the Act of 1996 provides for termination of mandate and substitution of arbitrator. Its sub-Section (1) provides that in addition to the circumstances referred to in Section 13 or Section 14, the mandate of an arbitrator shall terminate-- (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. Sub-Section (2) of Section 15 provides that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
22. The Supreme Court in N.B.C.C. Limited, supra, was dealing with the case where the parties agreed to extend the time for making publication of the award but the arbitrator failed to conclude the proceedings within the date fixed by the parties. The respondent moved the High Court to terminate the mandate. The High Court terminated the mandate in view of the fact that the Arbitrator failed to discharge the functions within the time fixed by the parties. It was held that the Arbitrator was bound to make and publish his award within the time agreed by the parties unless consent is not given by the parties for, thus the validity of the arbitrator shall automatically cease to exist after expiry of time limit so fixed. It was held that the High Court was justified in terminating the mandate of the arbitrator and the case was remanded to the High Court on limited ground for fresh decision on the application under Sec. 11(6) of the Act of 1996.
23. The Bombay High Court in Jayesh H. Pandya, supra, was dealing with the case where the first respondent invoked arbitration clause by instituting application under Sec. 11 of the Act of 1996. The Arbitrator appointed by the learned Single Judge held that the parties to agreement are entitled to stipulate the time within which the arbitral award has to be rendered. But in that case, the time for rendering award, which was prescribed, was four months. It was observed that where a party intends to assert a rigid adherence to the time prescribed by the arbitration agreement, it must at the earliest opportunity make its intention known to ensure compliance with a rigid standard as to time. In those facts, the Bombay High Court, in para 14 of the report, observed thus:-
"Parties to an arbitration agreement are entitled to stipulate the time within which an arbitral award is to be rendered. In the present case, the time which was prescribed was four months. In such a case, however, where a party intends to assert a rigid adherence to the time prescribed by the arbitration agreement, it must at the earliest opportunity make its intention known to ensure compliance with a rigid standard as to time. To hold otherwise would be to encourage a lack of candour on the part of parties in their dealings before the arbitrator. Interpretation of law by the Court must be such as to promote honesty, fairness and transparency on the part of parties and not such as would defeat the salutary object in the enactment of the Arbitration and Conciliation Act, 1996. Section 4 of the Act deals with a waver of the right to object and inter alia stipulates that a party who knows that any requirement under the agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay, shall be deemed to have waived his right to object. Section 4 is indicative of the policy of the legislature. The petitioners stood by and allowed the Arbitrator to fix a time schedule for the filing of pleadings. If they had a serious intent of not allowing the proceedings to continue beyond the period of four months, it was the duty of the petitioners to inform the Arbitrator at the earliest when the time schedule was fixed by the Arbitral Tribunal. Counsel appearing on behalf of the petitioners, in fact, fairly stated before the Learned Arbitrator on 27th August, 2007 that the contention which was sought to be taken up ought to have been urged on 4th May, 2007, but at that stage he had not read his papers. The petitioners' Advocate unfortunately sought to controvert the correctness of what was recorded by the Learned Arbitrator in his order dt. 27th August, 2007. The Arbitrator, as the record would show, was constrained to set the record straight by a communication dt. 27th September, 2007. The Learned Arbitrator is justified in coming to the conclusion that the petitioners have by their conduct waived their objection to enforce a punctilious observance of the time schedule of four months. To adopt any other construction would frustrate the object and purpose of arbitral proceedings and bring the whole machinery provided by the Act to facilitate an efficacious recourse to arbitration into grave peril. Speaking for myself, I would decline to accept a construction which would lead to that result. The Court is duty bound to effectuate the object and intent of Parliament in enacting the law and the view which I have taken is one which will protect the object which Parliament had in view."
24. The judgment in Jayesh H. Pandya, supra, was later followed by the Bombay High Court in M/s. Hindustan Wires Limited vs. Mr. R. Suresh and M/s. Indian Oil Corporation Limited, MANU/MH/0292/2013, where, in para 33 of the report, following observations were made:-
"The question that arises for consideration of this Court is whether any parties have consented for enlargement of time before the arbitrator. In my view, though time to make an award had expired, the petitioner participated in the matter without raising any objection about the expiry of the period or that the arbitrator ceased to have jurisdiction. In view of the pendency of various matters in High Court in identical matters, it appears that both parties did not want to proceed with the pending arbitration before the learned arbitrator which led to postponement of the proceedings before the learned arbitrator. No sooner the awards were set aside by the High Court and appeals were filed by the parties in the said proceedings which are pending, the present proceeding before the learned arbitrator proposed to be commenced. In view of the consent of both the parties for enlargement of time to complete the arbitration proceedings and to make an award mandate of the arbitrator has not come to an end and the learned arbitrator does not cease to have jurisdiction to proceed with the matter and to make an award. Even by conduct of both parties, time to complete arbitration proceedings and to make an award is extended."
25. In Shyam Telecom Ltd. vs. ARM, MANU/DE/0867/2004 : 2004 (3) ARBLR 146, the Delhi High Court found that the petitioner had waived its right to object to the continuance of the arbitration proceedings by having participated therein and not having raised the objection even after the time for making the award had expired. A learned single judge of the Delhi High Court held:-
"19. Mr. Rajiv Nayar in support of his contention that the petitioner will be deemed to have waived its right to object within the meaning of Section 4 of the Act, has sought support from the Supreme Court decision in the case of Narayan Prasad Lohia vs. Nikunj Kumar Lohia and Ors., MANU/SC/0114/2002 (SO; Inder Sain Mittal vs. Housing Board, MANU/SC/0117/2002; and a Karnataka decision in the case of K.S.R.T.C. vs. M. Keshava Raju, MANU/KA/0732/2003. In Narayan Prasad Lohia's case (supra), the Court considered the question of waiver of a right to object by a party in relation to the constitution of an arbitral tribunal and held that a conjoint reading of Sections 10 and 16 shows that an objection to the composition of the Arbitral Tribunal is a matter which is derogable. The Court further ruled that it is derogable because a party is free not to object within time prescribed in Section 16(2) of the Act and if a party chooses not to so object, there will be a deemed waiver under Sec. 4. The Court repelled the submission that Section 10 is a non-derogable provision.....22. In the opinion of this Court, these arguments of the learned counsel for the petitioner cannot be accepted; firstly, because 44/65 45 arbp. 56-2013 having regard to the totality of the facts by no stretch it can be said that the Article IV(3) of the Divestment agreement was not to the knowledge of the petitioner and, therefore, they could not object to the continuation of the proceedings after the expiry of the stipulated period. Not only that, no objection was raised about the continuation of the Arbitral proceedings but the petitioner continued to participate in substantive proceedings before the Arbitrator up till the final stage of the proceedings. In the opinion of this Court, these facts and circumstances are so glaring so as to attract the doctrine of waiver within the meaning of Section 4 of the Act. It is a settled legal position that waiver will be deemed to have taken place when a party knowing that an irregularity has been committed, did not object to the same but participated in the Arbitration proceedings without protest. Section 4 of the 1996 Act corresponds to Article IV of "UNCITRAL Modern Law. The principle of waiver is not new in the Arbitration law as it was so far contained in the case law and has been codified in the statute. Besides, in the opinion of the Court the right to object the continuance of the proceedings on the ground of expiry of the stipulated period is one which falls in Part-I of the Act and which is derogable. The object of providing time limit for rendering an Award by the Arbitrator is aimed at expeditious resolution of the disputes rather than to leave the disputes unsettled or inconclusive on the expiry of the stipulated period. -Thus, looking at the matter from any angle, this Court is of the opinion that having regard to the entirety of the facts and circumstances, the petitioner will be deemed to have waived its right to object about the continuation of the proceedings or alleging the termination of the mandate of the Arbitrator simply on the ground that the time prescribed under Article IV(3) of the Divestment agreement for making the Award had expired."
26. In Karnataka State Road Transport Corporation vs. M. Keshava Raju, MANU/KA/0732/2003 : AIR 2004 Kant 109, the Karnataka High Court, considering the scope and ambit of Section 4 of the Act of 1996, regarding waiver of right to object, observed thus:-
"Section 4 narrates the circumstances in which the party, who knowingly fails to object the non-compliance of any non-mandatory provisions of Part-I or any requirement under the arbitration agreement by the other party, is deemed to have waived his right to object. This Section is based on general principles such as "estoppel" or "venire contra factum proprium". It is intended to help the arbitral process function efficiently and in good faith. If there is non-compliance of any non-mandatory provision of Part I or of any requirement of the arbitration agreement by a party to an arbitration agreement of which the other party to the agreement though has the knowledge of such non-compliance but does not object without undue delay, or if a time limit is provided for stating that objection and no objection is taken within that period of time, such a party later on can neither raise objection about that non-compliance of any provision of Part I nor any requirement of the arbitration agreement since such party shall be deemed to have waived its objection. Though, in order to apply the doctrine of waiver by invoking Section 4, the first condition is that the non-compliance must be of non-mandatory provision of Part I or of any requirement under the arbitration agreement, certain mandatory provisions of the Act also provide for a grant of waiver in the event of failure to object. For example, sub-sections (2) and (3) of Section 16 are one of such mandatory provisions. Section 16(2) of the Act provides that a plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. Section 16(3) of the Act provides that a plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings."
27. Keeping in view the guiding principles of law enunciated by various Courts, a careful scrutiny of Sections 12, 13, 14 and 15 of the Act of 1996 in juxtaposition within the facts of this case, shows that there does not exist any circumstance, which may warrant termination of mandate of the arbitrator in the present case. On the facts as have been analyzed above, the matter was taken up by learned Arbitrator on 01.12.2015, soon after expiry of ten months on 11.11.2015, in which proceedings the applicant participated, it would be deemed to have waived its right to object continuation of the arbitrator in terms of Section 4 of the Act of 1996. Section 4 of the Act of 1996, provides for waiver of right to object that if a party, who knows that (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration, without stating his objection to such noncompliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. The said provision fully applies to the facts of the present case. The applicant knew when the arbitral proceedings were taken up by the learned Arbitrator in this case on 01.12.2015, that period of ten months had already expired, even then, it consented to continuance of arbitral proceedings by the sole Arbitrator. Since the applicant did not raise objection as to continuance the same before 11.11.2015, the day when the tenth month expired, it shall be deemed to have waived its right to so object.
28. In view of the facts and law, as discussed above, the principle of waiver would apply with full force in the present case. The right to object the continuance of the proceedings on the ground of expiry of the stipulated period falls in Part-I of the Act, which is derogable. The object of providing time limit for rendering an Award by the Arbitrator is aimed at expeditious resolution of the disputes rather than' to leave the disputes unsettled or inconclusive on the expiry of the stipulated period. The principle of waiver as is enshrined in Section 4 of the Act of 1996 would therefore apply against the applicant in the present case. In totality of the circumstances, therefore, the applicant would be deemed to have waived its right to object to continuance of the arbitral proceedings and the arbitrator, to resolve the dispute between the parties. Therefore, mandate of the arbitrator cannot be terminated merely because the arbitral award was not rendered within ten months. Consequently, the application fails and the same is dismissed. The stay application is also dismissed.
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