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2008 Supreme(Gau) 374
IN THE HIGH COURT OF GAUHATI (AGARTALA BENCH)
Utpalendu Bikas Saha, J.
Raj International - Appellants
Vs.
Tripura Jute Mills Ltd. - Respondent
Decided On : 26.05.2008
The arbitrator has a duty to act independently and decide the preliminary objection raised by the party regarding his jurisdiction. Failure to do so can render the arbitrator's actions illegal and call for interference by the Court.
Headnote:
Arbitration - Jurisdiction of Arbitrator - Section 16 of the Arbitration and Conciliation Act, 1996 - Summary of Acts and Sections: Section 16 of the Arbitration and Conciliation Act, 1996
Fact of the Case:
The petitioner entered into an Agreement with the respondent, Tripura Jute Mills Ltd. in 1994, which was terminated in 1994. In 2003, the respondent raised a dispute and appointed an arbitrator. The petitioner challenged the appointment, alleging lack of jurisdiction and bias of the arbitrator.
Finding of the Court:
The Court found that the arbitrator failed to rule on the preliminary objection raised by the petitioner regarding his jurisdiction, and instead acted at the instance of the appointing authority. The Court held that the arbitrator's failure to exercise his jurisdiction as intended by the legislature was illegal and called for interference. The impugned order was set aside and the matter was remitted back to the arbitrator to decide the plea of jurisdiction raised by the petitioner and then proceed with the arbitration in accordance with the law.
Issues: The main issue was whether the arbitrator can pass an order without deciding the preliminary objection raised by the petitioner regarding his jurisdiction, and whether a petition under Article 227 is maintainable in such a case.
Ratio Decidendi: The Court held that the statute casts a duty on the arbitrator to act independently and decide the preliminary objection raised by the party regarding his jurisdiction. Without giving a decision on the question of jurisdiction, the arbitrator has no right to proceed with making an arbitral award. The Court also found that the impugned order was not appealable, and therefore, the petitioner could approach the Court under Article 227 of the Constitution.
Final Decision: The impugned order was set aside, and the matter was remitted back to the arbitrator to decide the plea of jurisdiction raised by the petitioner and then proceed with the arbitration in accordance with the law.
U.B. Saha, J.
1. This revision petition under Article 227 of the Constitution has been filed calling in question the legality, correctness and validity of the order dated 25th September, 2007 passed by the Sole Arbitrator in an arbitration proceeding between the parties.
2. Heard Mr. S. N. Mitra, learned Counsel who appeared along with Mr. D. Jain, learned Counsel and Mr. R. Dutta, learned Counsel for the petitioner. Also heard Mr. G S. Das, learned Counsel for the respondent Tripura Jute Mills.
3. The brief facts leading to the filing of this writ petition are briefly stated as under :
On 7th July, 1994, the petitioner had entered into an Agreement with the respondent, Tripura Jute Mills Ltd. a Government Co. (hereinafter referred to as respondent-Jute Mill) which unless extended was to be expired on 31.7.1999. However, either party to the Agreement is/was at liberty to determine the agreement by giving three months notice. Clause No. 49 of the said agreement is reproduced hereunder :
49. All differences and disputes of any kind whatsoever between the parties to this agreement including disputes and differences in respect of the construction of this agreement or the breach of any terms thereof by any commission on commission or of any compensation claimed or payable thereof or in any mariner whatsoever in connection with or in relation to this agreement shall be referred to the sole arbitration of a single Arbitrator to be appointed by the Secretary/Commissioner. Industries Department. Government of Tripura. Both the Company and Second Party hereby mutually agree to obey and perform the award of such arbitrator. The company and the second party both have further agreed that only the Courts located in Agartala shall have jurisdiction to any each and every proceeding relating to such Arbitration and all matters arising out of this agreement.
4. The said agreement, according to the petitioner, was determined/terminated/cancelled in or about December, 1994 as the said agreement was unworkable and incapable of execution as well as implementation, and the petitioner left the Jute Mill with an understanding that the agreement in question was cancelled. Since 1994 to till August 2003, the respondent Jute Mill did not raise its voice, rather agreed and understood such cancellation of agreement including the terms of Arbitration clause.
5. On 28.8.2003, all on a sudden, the respondent-Mill wrote a letter to the Director, Directorate of Industries & Commerce, Government of Tripura, Gurkhabasti, Agartala for appointment of Arbitrator in the matter of dispute between TJML, the respondent herein and M/s Raj International, the petitioner, which is quoted hereunder :
To
The Director
Directorate of Industries & Commerce
Government of Tripura
Gurkhabasti, Agartala
Sub : Appointment of Arbitrator in the matter of dispute between TJML and M/s Raj International.
Sir,
I am to refer your letter vide No. F. VI-5(3)/LPG/DI/89-II/7651-53 dated 7.8.1996 regarding appointment of Arbitrator for settling the dispute in connection with the agreement dated 7.7.95 signed between Tripura Jute Mills Ltd. Agartala and M/s Raj International, Kolkata.
As desired by the appropriate authority, TJML was to work out exact claim in terms of money for violation of each and every clause separately for furnishing the same to you. TJML arranged to get the claim worked out through a Chartered Firm, but could not furnish the report due to misplaced of the records.
Now, the Assessment report is available with us and we are sending herewith a copy of the same. We already furnished the details of the agreement and disputed issues along with mention of the relevant clauses of the agreement which TJML wanted to bring before the Arbitrator for settlement vide letter No. TJ/FI(68)/957 dated 7.10.95 and TJ/FI(50) Vol-IV/543 dated 27.5.96.
It is to be mentioned that opinion of the Law Department, Government of Tripura regarding the delay in the process of lodging claim is obtained, according
