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TMI Blog2006 (4) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... rred payment terms. The applicant exported the machinery in two lots. The first shipment (2 sets) was made on 10th July, 2001 under Invoice No. 6321 and the second shipment (2 sets) was made on 5th October, 2001 under Invoice No. 6364. The dispute is in regard to these shipments. In pursuance of the agreement, the physical custody of the machines was handed over to the respondent which was accepted by it. However, the title did not pass, as it was due to pass only on payment of the last hire purchase instalment as envisaged under the agreement. The agreement was approved by the Reserve Bank of India vide approval No. FCB/CO/2001/747. The respondent after paying the first two instalments towards the shipments, did not pay the next two instalments and, therefore, as envisaged in the agreement the respondent became liable to return the custody and possession of the machinery to the applicant. Clause 6 of the Deed provides as under: "In case of any dispute, difference or issues arising under or in any manner concerning or in connection with this Deed, the same shall be resolved by arbitration by Mr. Manabu Nonoguchi, Area Manager, Sales Department, Murata Machinery Ltd., Textile Machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA") which is numbered as Case No.231/2003; and the BIFR has declared the respondent company as a sick industrial company and Industrial Development Bank of India (IDBI) has been appointed as the Operating Agency under Section 17(3) of SICA. On these grounds, it is contended that the present applications for appointment of an arbitrator filed under Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 cannot be proceeded with as the dispute raised would be the matter for consideration by the BIFR. It is further contended that once the named arbitrator declined to go into arbitration, it is not open to the applicant to seek appointment of another arbitrator; the terms of the contract entered into between the parties are very specific and clear; it does not contain any clause which would enable the parties to seek arbitration; and that is why the applicant company did not seek the consent of the respondent company for appointment of another arbitrator in place of the named arbitrator when the said arbitrator resigned. The respondent has prayed for dismissal of the present applications filed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Court can appoint an arbitrator to adjudicate upon the disputes between the parties. It is further urged that there is a distinction between the expressions `proceedings' and `suit' mentioned in Section 22(1) of SICA and the expression `arbitration proceedings' under the Arbitration and Conciliation Act cannot be termed either as a suit or proceeding and, therefore, pendency of a reference before the BIFR would not debar the arbitration proceedings under the Arbitration and Conciliation Act, 1996. In the present case, the named arbitrator under the contract, viz., Mr. Manabu Nonoguchi, Area Manager, Sales Department, Murata Machinery Ltd., Textile Machinery Department, Japan vide his letter dated 29th June, 2003 expressed his inability to discharge his role as arbitrator. Section 15 of the Act providing for termination of mandate and substitution of arbitrator, reads as under: "15. Termination of mandate and substitution of arbitrator.- (1) In addition to the circumstances referred to in section 13 and 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 parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted because Section 15 provides for a remedy for appointment of another arbitrator when the arbitrator appointed by the parties as provided in the agreement refuses to act an arbitrator. Settlement of dispute between the parties through medium of an independent person in whom both parties repose confidence is the basic foundation on which the law of arbitration stands and is founded. When the agreement provides for reference of a dispute to a particular individual and such agreed arbitrator refuses to act, the next appointment could be made as agreed by the parties, but where no such procedure is prescribed authorizing appointment of another arbitrator then the agreement clause cannot operate. It, therefore, follows that in case where the arbitration clause provides for appointment of a sole arbitrator and he had refused to act, then the agreement clause stands exhausted and then the provisions of Section 15 would be attracted and it would be for the Court under Section 11(6) to appoint an arbitrator on the procedure laid down in Section 11(6) being followed unless there is an agreement in the contract where the parties specifically debar appointment of any other arbitrator in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actment. The legislature has advisedly used an omnibus expression `the like' as it could not have conceived of all possible coercive measures that may be taken against a sick undertaking. Similarly, in Shree Chamundi Mopeds Ltd. vs. Church of South India, AIR 1992 SC 1439, this Court explained the words `or the like' as follows : "The words `or the like' have to be construed with reference to the preceding words, namely `for execution', `distress' which means that the proceedings which are contemplated in this category are proceedings whereby recovery of dues is sought to be made by way of execution, distress or similar proceedings against the property of the Company." It is, thus, apparent from the wording of Section 22(1) and the above decisions of this Court that the proceedings covered under Section 22 are the proceedings of coercive nature, be that legal or otherwise, which would come within the purview of expression `proceedings' as mentioned in the Section but it would not cover all proceedings. Section 22 (1) incorporated certain types of proceedings which would fall within its ambit and which are the proceedings for winding up of the industrial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 22 of SICA, no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company, shall lie and adjudication is prohibited of the liability of the industrial company or the guarantor. Section 22 further prohibits taking up of the proceedings of the nature which would be coercive for recovery of money against a sick undertaking. Proceeding in arbitration is neither a suit under sub-section (1) of Section 22 of SICA nor the proceedings thereunder and, therefore, there is no prohibition under Section 22 of SICA to take up the arbitration proceedings to adjudicate the liability of the parties to the arbitration proceedings. In my view, Section 22 of SICA does not debar the arbitration proceedings under the Arbitration and Conciliation Act, 1996. The objections to the arbitration proceedings raised by the respondent fail for the aforesaid reasons and are rejected. Mr. Manabu Nonoguchi was appointed as an arbitrator by the parties. Normally, the parties are the best judge for deciding as to who will be the person capable and competent to adjudicate the disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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