HIGH COURT DIVISION
(Original Statutory Jurisdiction)
|Mr. Zubayer Rahman Chowdhury, J.
|M/S Saudi-Bangladesh Services Company Limited, Orchard Plaza, 71, Nayapaltan (VIP Road), Dhaka, represented by its Managing Director.
Saudi Arabian Airlines Corporation, represented by its Country Manger, Dhaka Office, Pan Pacific Sonargaon Hotel, 107, Kazi Nazrul Islam Avenue, P.S. Tejgaon, Dhaka.
Arbitration Act (I of 2001)
Sections 23, 25, 42 and 43 (1)(a)(v)
United Nations Commissions on
International Trade Law
Articles 34 (2)(a)(iv)and 36 (1)(a)(iv)
The provisions of section 43(1)(a)(v) of the Act of 2001 as well as Articles 34(2)(a)(iv) and 36(1)(a)(iv) of the UNCITRAL Model Law are attracted in the instant case, both of which provides for setting aside an Award on the ground that “the arbitral procedure was not in accordance with the agreement of the parties”.
Evidently, the final deliberation that took place leading to the making and signing of the Award was only between the Chairman and the 2nd Arbitrator to the total exclusion of the 3rd Arbitrator, although the parties had referred the matter to a Tribunal comprising of three members. In my view, this is not what the Act or the Model Law contemplates and this is certainly not what the parties intended. Consequently, upholding the Award would be against the spirit and intendment of the Act and that, no doubt, would be contrary to public policy. Accordingly, the Award dated 08.06.2006 is set aside. …(52, 58 and 61)
Sheik Abdulla v. M.V.R.S. Firm and Sons and another, 1924 Rangoon 153, XXII CWN (1917-18), 301 (Abu Hamid Zahira Ala v. Golam Sarwar), European Grain v. Johnston, Lloyd’s Law Reports (1982) Vol. 2, 551, Dewan Singh v. Champat Singh, reported in AIR 1970 SC 967, S.L. Kapoor v. Jagmohan, reported in AIR 1981 SC 136, Industries and Others v. United Republic of Cameroon, (1986) XI Yearbook of Commercial Arbitration, 161, Nand Ram v. Fakir Chand, reported in ILR 7 (1885) All 523, Hindustan Petroleum Corporation Limited v. Environmental Engineers Ltd. and another, (2001) 2 Comp 79 (Bom), Murlidhar Agarwal and another v State of Uttar Pradesh and others, AIR 1974 SC 1924, Oil and Natural Gas Corporation Ltd v. SAW Pipes Ltd, AIR 2003 SC 2629, ref.
Mr. Rafique-ul Huq, Senior Advocate with
Mr. Ajmalul Hossain, Advocate
…For the Petitioner
Mr. A. J. Mohammad Ali, Senior Advocate with
Mr. Md. Ashanur Rahman and
Ms. Verbeena Huda, Advocates
Zubayer Rahman Chowdhury, J.
This is an application under section 42 read with section 43 of the Arbitration Act, 2001 for setting aside the Award dated 08.04.2006 passed by the Arbitral Tribunal in an arbitration proceeding between Saudi Arabian Airlines Corporation (the claimant) and M/S. Saudi-Bangladesh Services Company Limited (the respondent).
- 2. In the arbitration proceeding before the Arbitral Tribunal (hereinafter referred to as the Tribunal), the respondent, as claimant, made a claim of Tk. 32,27,50,566.51, while the present petitioner, as respondent, not only denied the claim, but made a counter claim for Tk. 161,15,29,583.00 along with interest @ 16% per annum on the awarded sum.
- 3. The three member Tribunal comprising of Mr. Justice M. H. Rahman, a former Head of the Caretaker Government and former Chief Justice of Bangladesh, Mr. M. Amirul Islam, Senior Advocate, Supreme Court of Bangladesh and Dr. M. Zahir, Senior Advocate, Supreme Court of Bangladesh, upon hearing the parties, by a majority decision, made an Award of Tk. 31,27,50,566 in favour of the claimant (the respondent herein) and dismissed the counter claim of the respondent (the petitioner herein).
- 4. The dissenting opinion was given by Mr. M. Amirul Islam, who allowed the claim of the claimant for the amount of Tk. 4,88,72,217.43 and also allowed the counter-claim of respondent no.1 for Tk. 57,26,92,897.67.
- 5. Since the instant application was filed challenging the legality and propriety of the Award on the ground of non-compliance as well as violation of the provisions of the Arbitration Act, 2001 by the Tribunal, and that too, at the stage of making and signing the Award, this Court is not inclined to enter into a discourse regarding the claims and counter claims of the parties or, for that matter, the merit of the case.
- 6. Mr. Ajmalul Hossain, the learned Advocate appearing for the petitioner submits at the outset that he will not press ground numbers I, II, III, IV and V which relate to jurisdiction of the Tribunal, but would rely on the other grounds, particularly ground numbers VI, VII and XI stated in his application.
- 7. Giving a factual background of the entire arbitration proceeding, Mr. Hossain submits that in the instant case, the majority decision of the Trubunal is not legal and binding upon the parties in view of the fact that one of the Arbitrators, namely, Mr. M. Amirul Islam (hereinafter referred to as the 3rd Arbitrator) was completely left out of the process of consultation before finalizing and making the Award. Mr. Hossain submits that the spirit and intent of the Arbitration Act, 2001 (hereinafter referred to as the Act) is to ensure that the arbitration proceeding including the making and signing of the Award is conducted by effective participation of all the members of the Tribunal, but in the instant case, there was a clear deviation therefrom. Mr. Hossain accepts the position that there are may be an Award by the majority, but contends that such an Award has to be made after taking due consideration of the views and opinion of the dissenting Arbitrator.
- 8. Referring to Annexures I and II, annexed with the dissenting opinion marked as Annexure F, Mr. Hossian submits that upon conclusion of the hearing on 05.04.2006, the 3rd Arbitrator had written to both the Chairman and the 2nd Arbitrator (Dr. M. Zahir) on the following day expressing his view that the Tribunal should meet and deliberate on the issues before making the Award.
- 9. Referring to the respective endorsements made by the Chairman and the 2nd Arbitrator on the letter sent by the 3rd Arbitrator, Mr. Hossain submits that the 3rd Arbitrator was led to believe that the members of the Tribunal would meet at BILIA (the venue of the Arbitration proceeding) for holding deliberation before making the Award. However, when the 3rd Arbitrator went to BILIA at the appointed date and time, ie., on 08.04.2006 at 10:00 a.m., he was given a one hundred page typed Award, which had already been signed by both the Chairman and the 2nd Arbitrator. Upon receiving the same, the 3rd Arbitrator put the following endorsement on the Award :
“I just now saw the opinion this morning at 10.20 a.m. Since I differ with the opinion given herein I will submit my separate opinion.”
Barrister-at-Law, Senior Advocate
- 10. Mr. Hossain contends that without paying any heed to the aforesaid request and without even affording an opportunity to the 3rd Arbitrator to participate in the deliberation and express his views before the Award was made, the Chairman and the other member of the Tribunal finalized and signed the Award. Therefore, on this ground, the Award is liable to be set aside.
- 11. Substantiating his argument, Mr. Hossain has referred to the opening paragraph of the dissenting opinion given by the 3rd Arbitrator, as evidenced by Annexure-F, which reads as under :
“At the outset I express my discomfort with the statement in paragraph 45 of the award opinion of my fellow con-arbitrators, Mr. Justice M.H. Rahman, Chairman and Dr. M. Zahir that “Mr. M. Amir-Ul Islam, Barrister-at-Law, Senior Advocate, co-arbitrator, has been consulted …”. On the contrary, I wrote letters to both of my co-arbitrators on April 06, 2006 stating that our very brief discussion on the date of the close of the hearing was not enough and we should discuss at length with regard to each of the issues before we make up our mind. In response to my letters both the learned co-arbitrators were pleased to fix a meeting on April 08, 2006 in the morning. But with utter surprise both my co-arbitrators without allowing time for the proposed discussion signed the award at 10.20 on the same date before I could even have a look at the award which was produced in a finished and conclusive form typed on a stamped paper, already signed by my two co-arbitrators.”
- 12. Mr. Hossain submits that it is evident from the aforesaid statement made by the 3rd Arbitrator that he was neither consulted nor was he given any opportunity, as was requested by him on the previous day, to discuss the issues before the Award was made.
- 13. Referring to section 43(v) of the Act, Mr. Hossain contends that although the law requires the arbitration proceeding to be conducted in accordance with the agreement of the parties, there was a clear deviation from the agreement in as much as, the 3rd Arbitrator was totally excluded from the deliberation process before making and signing the Award. In doing so, according to Mr. Hossain, the Tribunal had not only acted in utter disregard to the requirement of section 23 of the Act, but had also acted contrary to the provisions of section 25 of the Act. Consequently, Mr. Hossain submits, the Award is liable to be set aside.
- 14. Mr. A. J. Mohammad Ali, Senior Advocate appearing with Ms. Verbeena Huda, Advocate for the respondent (Saudi Arabia Airlines Corporation) submits that the Award under challenge was passed by the Tribunal upon holding a lengthy hearing in presence of both the parties, who were duly represented by their learned lawyers. Mr. Ali further submits that the arbitration proceeding lasted for about three years and, therefore, it cannot be said that the parities did not have adequate opportunity to place their respective case before the Tribunal. Mr. Ali further submits that the agreement between the parties provides for an Award by the majority and in the instant case, the Award having been so made, it does not call for any interference by this Court.
- 15. Mr. Ali submits categorically that the entire proceedings took place before the Tribunal comprising of the Chairman and the two Arbitrators who had ample opportunity to discuss the issues amongst themselves when the hearing took place and, therefore, the allegation of excluding the 3rd Arbitrator from the deliberation process before making the Award is not tenable. Mr. Ali further submits that if any member of a Tribunal decides to give a dissenting opinion, he can very well do so. Mr. Ali lastly submits that if the instant application is allowed, it will open a floodgate and frustrate the purpose and spirit of the Act, which is primarily intended to settle disputes between the parties outside the Court.
- 16. Undoubtedly, there is a great deal of force in the contention of Mr. Ali that the purpose of the Arbitration Act, 2001 is to minimize the duration of litigation between the parties by affording a forum for settling their dispute outside the Court.
- 17. When an arbitration proceeding is conducted before an Arbitral Tribunal, there may very well be an Award by the majority. This is an undisputed position. At the same time, the arbitration proceeding must also conform to certain well established principles and norms of legal rules and conduct. Upon conclusion of hearing, the members of the Tribunal must hold proper deliberations amongst themselves covering all the issues of the proceeding before making and signing the Award. This is not an idle formality, but a judicial requirement designed to ensure that the matter is heard and deliberated by each and every member of the Tribunal before making and signing the Award.
- 18. Although a good number of cases have been cited by Mr. Hossain, I shall only refer to those which are relevant for the purpose of disposal of the instant case. On the other hand, Mr. Mohammad Ali has lightened the burden of the Court by not referring to any decision.
- 19. In Sheik Abdulla v. M.V.R.S. Firm and Sons and another, reported in 1924 Rangoon 153, both the parties nominated five Arbitrators and agreed that the Award of the majority of the Arbitrators would prevail. Nevertheless, the Court held :
“In this view of the reference each party was entitled to have the benefit of the opinion and decision of all the five arbitrators and not only some of them. From the fact that the three arbitrators who actually made the award happened to hold the same opinion it cannot be assumed that even if the other two had acted, the opinion of the former three would not have been affected. It is not impossible that a discussion among all the five might have produced a different award.”
- 20. In another case, reported in XXII CWN (1917-18), 301 (Abu Hamid Zahira Ala v. Golam Sarwar), the Court held :
“……. It is essential that there should be a unanimous participation by the arbitrators in consulting and deliberating upon the award to be made ; the operation of this rule is in no way affected by the fact that authority is conferred upon the arbitrators to make a majority award ; even where less than the whole number of arbitrators may make a valid award, they cannot do so without consulting the other arbitrators.”
- 21. Mr. Hossain refers to the widely followed work of “Rusesell on Arbitration”, 28th Edition, where it has been stated :
“All the arbitrators must act together. As they must all act, so they must all act together. They must each be present at every meeting ; and the witnesses and the parties must be examined in the presence of them all.
All must make award together. Where there are two or more arbitrators, all should execute the award at the same time and place. If they do not, the award may be invalidated, but as the objection is one of a formal character, if no other objection is shown, the court may remit the award to the arbitrators for correction.”
- 22. The aforesaid statement was cited with approval in the case of European Grain v. Johnston, reported in Lloyd’s Law Reports (1982) Vol. 2, 551, where the Court held :
“What I think the authorities show, as must be right, is that an arbitration conducted by a tribunal of several arbitrators necessarily requires a joint process of full and complete adjudication by all of them, so that the ultimate award represents the state of mind of all of them at the time when they sign it”.
(Per Lord Justice Kerr).
- 23. It appears from Annexure I and Annexure II of Annexure F, that upon conclusion of the hearing on 05.04.2006, the 3rd Arbitrator sent a letter on the following day to the Chairman and the 2nd Arbitrator of the Tribunal requesting for a meeting to discuss and deliberate on the issues before making the Award. It is perhaps pertinent to quote the said letter in full, which reads as under :
“April 6, 2006
Dear Hon’ble Chairman
Mr. Justice Habibur Rahman and
Co Arbitrator Dr. M. Zahir
Ref: Saudia Arabian Airlines Corporation
Saudia Bangladesh Services Company Ltd.
I refer to our discussions yesterday after the close of the hearing. I thought this was not adequate to discuss the proposed award, not allowing any opportunity to discuss the issues and the underlying legal principles involved both on question of fact and law. While we accepted the obligation to hear and determine the dispute between the parties it will not be proper to rush for an award without discussing each of the issues. You proposed Saturday, 08.04.2006 I hope you will not close your mind and take a view before we have had opportunity to share our thoughts and reasoning. I invite you to arrange a mutually convenient time when we can discuss the issues between the parties and deliberate our reasoning for resolution of those issues. You suggested Saturday but before signing the award there has to be enough time, opportunity and willingness to share the reasoning before taking a view and finalizing the Award.
Since this matter is of the greatest importance to the parties, I feel that it is incumbent upon us to properly and judicially approach the issues with a view to resolving them and the material and legal principles have to be considered before the Award is finalized.
Kindly inform me of a convenient date and time for proper deliberations with adequate opportunity to deal with each of the issues before the award is made. If there is such an opportunity prior to finalizing the Award, then, I shall certainly make myself available to deliberate upon these issues and consider the proper Award to be made in this case.
M. Amir-Ul Islam
- 24. Upon receiving the aforesaid letter, the Chairman of the Tribunal made the following endorsement :
“The matter was heard for days. The parties have given their written submission extensively. I shall be at the Bilia at 10-10 AM on next Saturday.”
- 25. The 2nd Arbitrator made the following endorsement :
“We have already exchanged opinion, pl. contact Chairman. Friday 7th April, 06 we can meet. Alternatively you can give your opinion later. But whatever the Chairman says is OK with me.”
Signed (M. Zahir)
6 April 2006
- 26. The following day, i.e., 7th April was a holiday, being Friday. On 08.06.2006 (Saturday), when the 3rd Arbitrator went to BILIA at 10:00 a.m., he was given the 100 page typed Award, which had already been signed by the Chairman and the 2nd Arbitrator.
- 27. Immediately thereupon, the 3rd Arbitrator made the following observation, which appears at page 100 of the Award :
“I just now saw the opinion this morning at 10.20 a.m. Since I differ with the opinion given herein I will submit my separate opinion.”
Barrister-at-Law, Senior Advocate.
- 28. Furthermore, at page 53 of the dissenting opinion, the 3rd Arbitrator made the following observation :
“Though it is a dissenting award, I wish, I could share my views as expressed in this opinion with my co-arbitrators before they signed their award which I did not have the opportunity to see before they were signed by them.”
- 29. From the sequence of events noted above, it is apparent that the 3rd Arbitrator was not provided with any scope or opportunity to deliberate on the issues with the other members of the Tribunal and express his views before the Award was made. Moreover, there is no indication in the endorsement made by the Chairman that he had already discussed the matter with the 2nd Arbitrator. Rather, from his endorsement, it appears that the 3rd Arbitrator was asked to be present at BILIA on Saturday at 10:00 in the morning, thereby giving him an impression that there would be a deliberation before making the Award, as was requested for by the 3rd Arbitrator in his letter dated 06.04.2006.
- 30. At the penultimate page of Award made by the two Arbitrators, there is a statement to the effect that the 3rd Arbitrator had been consulted. Paragraph 45 at page 99 of the Award reads as under :
“Mr. M. Amir-Ul-Islam (sic), Barrister-at-Law, Senior Advocate, co-arbitrator, has been consulted. He differs from the above finding and has stated that he will give his opinion later on. This award is given on the basis of agreement between the Chairman and another arbitrator, that is, a majority of two in a panel of three arbitrators.”
- 31. However, the endorsement made by the 3rd Arbitrator at page 100 of the Award as well as the opening and concluding remarks made by him in his dissenting opinion, quoted above, clearly demonstrate that the 3rd Arbitrator was neither consulted nor given any opportunity to deliberate on the issues with the other two Arbitrators before the Award was finalized and signed. In other words, the Award was made and signed by the Chairman and the 2nd Arbitrator without even the participation, let alone any input, of the 3rd Arbitrator. Evidently, there was an omission or failure on the part of the Chairman of the Tribunal to deliberate on the issues with the 3rd Arbitrator or, at least, provide an opportunity to him to express his views on the issues before making the Award, moreso, when he had expressed such intention immediately after conclusion of the arbitration proceeding, as is evident from the letter dated 06.04.2006, referred to above.
- 32. Having discussed the factual aspect and back-ground of the matter, I now intend to deal with the legal aspect of the case.
- 33. Section 23 of the Act, which deals with the general responsibilities of the Tribunal, stipulates that the Tribunal shall deal with the dispute submitted to it “fairly” and “impartially”.
- 34. Section 25 of the Act provides that subject to the Act, the Tribunal shall follow the procedure “to be agreed on” by the parties in “conducting its proceedings”. A similar provision appears in the ‘United Nations Commission on International Trade Law’ (briefly UNCITRAL), Model Law on International Commercial Arbitration (hereinafter referred to as the ‘Model Law’). Article 28(4) of the Model Law stipulates that in all cases, the arbitral tribunal shall decide in accordance with the terms of the contract.
- 35. Section 36(3) of the Act mandates that the Tribunal shall decide in accordance with the terms of the contract.
- 36. Upon a combined reading of the sections and articles referred to above, the conclusion that flows therefrom is that the Tribunal, meaning all the members and not just the