Mukul Mudgal, J.@mdashThe first application, IA.9696/03 is filed by Shri O.C. Mathur, respondent No. 2 u/s 15(2) of the Arbitration and Conciliation Act, 1996(hereinafter referred to as the `Act'') for appointment of substitute arbitrator in place of Dr. Justice A. S. Anand on the ground that pending arbitration proceedings do not stand terminated u/s 32 of the Act. The second and third applications, I.As.11496 and 11599 of 2003 have been filed in A.A.No.122 of 2000 and CS(OS) No. 1084-A of 2000 by the petitioner and respondent No. 1/petitioner respectively in the said suit for withdrawal of their arbitration petition and the suit.
2. The arbitration petition, Arb.P.No.122 of 2000 was filed by M/s J.B.Dadachanji (in short the `JBD'') u/s 11 of the Act for appointment an arbitrator for adjudication of disputes regarding validity of modification deed dated 1st January, 1997, dissolution of firms and rendition of accounts. The respondent No. 1 in this petition is Shri Ravinder Narain (in short `RN''), who is the partner of JBD Company and respondent No. 2, Shri O.C. Mathur, who is another partner of JBD company (in short OCM).
3. Since JBD, the petitioner herein has settled all the disputes with RN in the Section 11 petition, it seeks to withdraw the petition for appointment of an arbitrator as it does not want to carry on the arbitration proceedings any further. A similar prayer is also sought by RN in IA.No.11599/2003 in CS(OS) No. 1084-A/2000, filed by RN for dissolution of firms and rendition of accounts. It is not in dispute that initially this Court by its Order dated 9th July, 2002 did appoint Hon''ble Dr. Justice A. S. Anand as the sole arbitrator at the behest of JBD but even before reference could be entered upon or notice be issued to the parties, the learned Arbitrator withdrew from the arbitration proceedings by writing the letter dated 6th July, 2003. The petitioner has based his application to withdraw the arbitration petition on the ground that it had inherent rights to do so particularly when the petitioner states that he has settled all disputes raised by him and has no dispute with either RN or OCM. It is also submitted that upon the withdrawal of the learned arbitrator appointed by this Court from the office of Arbitrator and termination of the mandate of the arbitration as per Section 15(2), the rules applicable to the appointment of the arbitrator became applicable and the procedure stipulated u/s 11 was thus required to be complied with and thus a substituted arbitrator cannot be sought by any party including OCM without following the procedure and the rules applicable prior to the appointment of the arbitrator. This plea has also been supported by RN. OCM has strenuously opposed the withdrawal of this petition as well as the suit and submitted that the functions u/s 11 of the Act are administrative and not judicial or quasi-judicial and a mandatory duty u/s 15(2) of the Act is cast upon this Court to appoint a substitute arbitrator. It is thus submitted by OCM that once an arbitrator was appointed as per Section 11, arbitration proceedings have commenced u/s 21 and they must be deemed to be continued to be pending and must be concluded. Since the arbitrator already stood appointed by the Order dated 9th July, 2002, passed by Hon''ble Mr. Justice D.K. Jain, the arbitration proceedings cannot be said to have terminated notwithstanding the withdrawal of Hon''ble Dr. Justice A.S. Anand as an Arbitrator. Consequently as per IA.No.9696 of 2003 filed by OCM u/s 15(2), it is mandatory to appoint an substitute arbitrator since pending arbitration proceedings have not stood terminated u/s 32. In a partnership dispute for dissolution of firm and rendition of accounts, if any partner does not proceed, other partners are entitled to proceed and if necessary are entitled to be transposed in exercise of judicial or quasi-judicial powers by Arbitral Tribunal in a manner akin to partnership suits.
4. I will first deal with the plea, relating to partnership disputes and partners being claimants. In the present case, the dispute does not arise under the Partnership Act and all the partners being claimants cannot, ipso facto, apply to exercise of administrative powers u/s 11 of the Act by this Court.
5. Furthermore if the initiator of the arbitration proceedings wishes to withdraw his claim particularly on the ground that all disputes having been settled and he having no dispute/claim, it is not open to the respondent to plead that the arbitration proceedings must continue. Section 14 and Section 15(2) read as follows:-
"14. Failure or impossibility to act._(1) The mandate of an arbitrator shall terminate if__
(a) 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.
(2)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.
(3) If, under this section or sub-section (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of Section 12.
15. Termination of mandate and substitution of arbitrator(1)........
(a) ...... ......
(b) ...... .......
(2) 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."
Section 15(2) clearly indicates that upon the termination of mandate of an arbitrator, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. It is not in dispute that the said rules indicated that the procedure prescribed under the agreement between the parties required the respondent No. 2, OCM who now seeks arbitration, to serve a notice on the petitioner JBD. Such procedure not having been complied with, it is not open to the respondent No. 2, OCM, to object to the withdrawal of the arbitration proceedings by the claimant or the suit by RN particularly when the claimant does state categorically that there is no dispute left with any other parties. What must be kept in mind is the fact that the original appointment of an arbitrator was sought for by JBD, and supported by OCM, though resisted by RN. Eventually the arbitrator was appointed by this Court u/s 11 of the Act on 9th July, 2002. OCM had, however, not gone through the pre-requisite procedure of seeking an appointment under the existing agreement for arbitration and then approaching the Court u/s 11 upon the delayed response or a lack of response to the request for the appointment of an arbitrator. In such a situation, the position of law laid down in the decision of this Court rendered in Arb.P.No.245/04 entitled M/s Venture India Properties Pvt. Ltd v. Air Force Naval Housing Board on 13th December, 2004 shall not be applicable as OCM had not sought the original appointment and then approached the Court u/s 11 of the Act. In the above judgment, the following position of law was laid down:-
5. The provisions of the Act and the statement of objects and reasons which call for an expeditious disposal of disputes cannot support the adoption of the interpretation suggested by the learned counsel for the petitioner. The interpretation suggested b the respondent would reward the lethargy/inaction of a recalcitrant party and cannot be countenanced. The earlier Section 11 proceedings in this Court arose on account of the default of the respondent in not appointing an arbitrator within time, leading to the forfeiture of right of such appointment as per the law laid down by the Hon''ble Supreme Court in Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. reported as JT 2000 (Supp.2) SC 226. The respondent had already, by its delayed response to the request for the appointment of an arbitrator under the original arbitration clause forfeited the right to appoint an arbitrator.''''
In my view the conditions precedent for the application of the above judgment do not exist in the present case as OCM did not initially seek arbitration under the agreement. Since the original petitioner u/s 11, JBD seeks to withdraw and OCM, the original respondent who supported the plea for appointment of an arbitrator now seeks to invoke Section 11, the rules applicable will be as per the original agreement as OCM had not gone through the procedure provided in the agreement for appointment of an arbitrator and then sought, upon a delayed or lack of response to such a request, the appointment of an independent arbitrator through Court, in such proceedings. Consequently in such a situation, OCM or his legal heirs, as the case may be must first resort to the rules applicable at the time of the appointment of an arbitrator i.e., in accordance with the arbitration clause and OCM cannot straightway seek appointment of an arbitrator by the Court u/s 11 of the Act.
6. In this view of the matter, the prayer of the petitioners in Arb.P.No.122/2000 and CS(OS) No. 1084/2000 to withdraw their respective petition and suit is justified and they are accordingly allowed to withdraw the same. Applications stand allowed and disposed of accordingly. However, as per the plea of the counsel for the respondent No. 2, it will be open to the legal heirs of OCM, who passed away since the last day of hearing to proceed in accordance with the provisions of Section 15(2) and initiate proceedings to seek the appointment of an arbitrator as per the rules that were applicable to the appointment of the arbitrator being replaced.
7. In this view of the matter, the prayer made in IA.No.9696/03 by OCM cannot be granted and the application is, Therefore, rejected.
8. Petition and suit are disposed of as having been withdrawn. All the pending applications also stand disposed of.
