JAYESH H. PANDYA & ANR. versus SUBHTEX INDIA LTD. & ORS.

Citation: [2019] 11 S.C.R. 765 · Decided: 27-08-2019 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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JAYESH H. PANDYA & ANR.
v.
SUBHTEX INDIA LTD. & ORS.
(Civil Appeal No. 6300 of 2009)
AUGUST 27, 2019
[N. V. RAMANA, MOHAN M. SHANTANAGOUDAR AND
AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act 1996: ss. 14 and 15 – Failure
or impossibility to act – Arbitration agreement – In terms of the
conditions, arbitrator to make award within four months from the
date of service of copy of the agreement, however this period could
be extended with the consent of the parties – Arbitrator unable to
complete the arbitral proceedings within four months from the date
of the first preliminary meeting in terms of the arbitration agreement
and appellants refused to provide consent to extension of time –
Issuance of direction by the tribunal to respondent No 1 to obtain
extension of time or to approach court for a clarification – However,
no application filed by respondent no. 1 – Thereafter, arbitrator
fixed a meeting, however, appellants filed an application that the
tribunal had become functus officio with no power to proceed as
the four-month period had expired – Rejection of the application
by the arbitrator – Appellant then filed arbitration petition invoking
s. 14 – Declaration sought that the arbitrator had become de jure
unable to perform his functions and mandate to act as arbitrator
had terminated – Dismissed by the High Court  – On appeal, held:
It is clear from the reading of sub-section 1(a) of s. 14 that mandate
of an arbitrator shall terminate if it fails to act without undue delay
–  Arbitration proceedings are supposed to be governed and run by
the terms as agreed by the parties, failing which it would frustrate
the mandate of the object of the Act – Thus, the arbitrator, cannot
go beyond the clause of the arbitration agreement – Parties have to
stand by the terms of contract including the Arbitrator – On facts, it
cannot be held that there has been a waiver of valuable rights where
the circumstances show that what was done was involuntary –
Furthermore, there is no provision under the arbitration agreement
to condone the delay when agreement between the parties binds
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SUPREME COURT REPORTS
[2019] 11 S.C.R.
them to see that the arbitration proceedings should be concluded
within the time prescribed – s. 14 read with s. 15 also recognise this
mechanism – After the expiry of four months period from the date
of first preliminary meeting, the Arbitrator indeed became de jure
unable to perform his functions and the mandate to act as an
Arbitrator in the arbitral proceedings between the parties stood
terminated – Thus, the order passed by High Court is set aside.
Allowing the appeal, the Court
HELD: 1.1 It is clear from the bare reading of sub-section
1(a) of Section 14 of the Arbitration and Conciliation Act 1996
that mandate of an arbitrator shall terminate if it fails to act without
undue delay. In the instant case, the first preliminary meeting
was held on 4th May, 2007 and the Arbitrator in terms of the
agreement was supposed to conclude and pass the award within
a period of four months which indisputedly stood expired on 4th
September, 2007 and in the meantime the appellants recorded
their objection of not consenting for extension of time beyond 4th
September, 2007 and thus, it can be construed that parties were
not in agreement for extension to the mandate of the Arbitrator
failing which the arbitral proceedings automatically stood
terminated. [Para 16][777-A-B]
1.2 Sub-section (2) of Section 14 clearly stipulates that if a
controversy remains concerning any of the grounds referred to
in clause (a) of sub-section (1), the party may, unless otherwise
agreed by the parties, apply to the Court to decide on the
termination of the mandate and the appellants rightly applied to
the Court for termination of the mandate of the Arbitrator pursuant
to the provisions of this Section and the Court was within its
jurisdiction to decide accordingly. [Para 17][777-C-D]
1.3 It is true that the object of the scheme of the Act, 1996
is to secure expeditious resolution of disputes and it is based on
the fulcrum of promptitude but at the same time the Arbitrator is
required to adjudicate the disputes in view of the agreed terms
of contract and the procedure. Therefore, the arbitration
proceedings are supposed to be governed and run by the terms
as agreed by the parties. The Arbitrator, therefore, cannot go
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beyond the clause of the arbitration agreement.

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