2024 Supreme(Online)(DEL) 11083
HIGH COURT OF DELHI
Prathiba M. Singh, J
MMTC LTD – Appellant
Versus
L.C. MADAN (DECEASED) – Respondent
O.M.P. 29/2016
Advocates:
For the Appellants/Petitioners: Mr. Swetank Shantanu, Mr. Pratap Shanker
For the Respondents: Mr. Jagdeep Singh Bakshi, Mr. Navroop Singh Bakshi
Arbitration agreements survive the death of a party, but failure to substitute legal representatives within the prescribed time leads to abatement of claims, extinguishing the right to sue.
Headnote:(A) Arbitration Act, 1940 - Section 6 - Appointment of Arbitrator - Petition filed by MMTC Ltd. for appointment of an arbitrator after the demise of the respondent, L.C. Madan - The arbitration agreement remains enforceable despite death, but rights may extinguish if no steps are taken to implead legal representatives - Petitioner failed to act for years post-death, leading to abatement of proceedings. (Paras 11-34)
(B) Legal representatives - The obligation to substitute legal representatives exists, and failure to do so within the prescribed time leads to abatement of claims - The court emphasized the need for prompt action in arbitration matters. (Paras 12-26)
Facts of the case:
The petitioner sought to appoint a new arbitrator after the death of L.C. Madan, failing to implead his legal heirs for years. The original arbitration began in 1997 and faced multiple delays due to deaths of arbitrators and lack of action by the petitioner.
Findings of Court:
The court found that the petitioner's claims had abated due to inaction in bringing the legal representatives on record, thus extinguishing the rights.
Issues: Whether the arbitration proceedings can be considered abated due to the death of the respondent and the petitioner's failure to substitute legal heirs.
Ratio Decidendi: The court held that the arbitration agreement survives death, but the right to sue can extinguish if the claimant fails to act diligently in involving legal representatives.
Result: Petition dismissed.
JUDGEMENT
Prathiba M. Singh, J.
1. This hearing has been held through hybrid mode.
BRIEF FACTS
2. The present petition under Section 8 of the Arbitration Act, 1940 (hereinafter referred as the ‘1940, Act’) has been filed by the Petitioner - MMTC Ltd. seeking appointment of an Arbitrator in place of the Arbitrator appointed vide order dated 17th September, 2014 i.e., Justice V.S. Aggarwal (Retd.,), who had recused/resigned.
3. The proceedings in this case have a long and chequered history. The Petitioner is engaged in the business of exporting gold jewellery through its associates to various countries. One such associate was Late Mr. L.C. Madan- Respondent with whom an agreement was executed on 23rd February, 1993 for export of gold jewellery. The Petitioner in the present case agreed to sanction a Packing Credit Limit of Rs. 40 Lacs in favour of the Respondent and further sanctioned a Packing Credit Limit of 8kg Gold.
The arbitration clause in the said agreement reads as under:
“11. In the event of any question of dispute arising under or out of relating to the construction, meaning and acceptance or effect of this contract or breach thereof, the matter in dispute shall be referred to two arbitrators, one to be nominated by MMTC and the other by the unit. In case of the said arbitrators not agreeing then the disputes shall be referred to an Umpire to be appointed by the arbitrators in writing before proceeding on the reference. The decision of the arbitrators or in the event of their not agreeing of the Umpire, shall be final and binding on the parties.
The provisions of the Indian Arbitration Act 1940 and modifications thereof shall be deemed to apply to the proceedings. The arbitrator or the Umpire, as the case may be shall be entitled with the consent of the portion to enlarge the time. from time to time for making the award. The arbitrators / Umpire shall give a reasoned award. The venue of arbitration shall be New Delhi.”
4. It is the case of the Petitioner that from time to time, Late Mr. L.C. Madan would apply for release of gold, and packing credit, and advances were given by the Petitioner which were to be paid after raising invoices. As per the Petitioner, certain invoices remained unpaid. Accordingly, the matter was initially referred to a sole Arbitrator namely Retd. Justice M.L. Verma. Subsequently, vide order dated 25th November, 1997, a Co-Arbitrator namely Retd. Justice R.N. Mittal was also appointed.
5. The matter was pending before the said two member Arbitral Tribunal since November, 1995. The matter was at the stage of final arguments around 12th September, 2005, after which the Tribunal did not hold any hearings for reasons that are not available on record. Mr. Madan unfortunately expired on 22nd February, 2010 and the Petitioner is stated to have been informed of the same on 10th September, 2010 in some other proceedings.
6. Retd. Justice R.N. Mittal passed away on 4th February, 2014 which resulted in a vacancy being created. MMTC Ltd. then issued a notice dated 19th March, 2014 asking the Respondent to appoint an Arbitrator so that the Tribunal could be constituted. However, after having not received any response, O.M.P. 664/2014 was filed in which vide order dated 17th September, 2014, a substitute Arbitrator was appointed. The said order is extracted below:
“Learned counsel for the legal heirs of deceased Mr.
L.C. Madan has submitted that he has no objection if the court appoints an arbitrator in place of Mr. R. N. Mittal who has since expired.
In view of the above, I appoint Mr. Justice V.S. Aggarwal, Retired Judge, Delhi High Court as an Arbitrator to conduct the arbitration under the aegis of the Delhi International Arbitration Centre (DAC), Delhi High Court, New Delhi as per rules, who shall start the proceedings from the stage at which the deceased arbitrator has left.
Learned arbitrator is free to fix his own fee and other expenses.
With these directions, the petition stands disposed of.”
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