Uttarakhand High Court
Ms. Golden Infracon Pvt. Ltd. vs State Infrastructure And Industrial ... on 14 February, 2017
Equivalent citations: AIR 2017 UTTARAKHAND 62, (2017) 4 ARBILR 48
Author: Sudhanshu Dhulia
Bench: Sudhanshu Dhulia
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Arbitration Application No. 35 of 2016
M/s Golden Infracon Pvt. Ltd. ... Applicant
Vs
State Infrastructure & Industrial Development Corporation of
Uttarakhand Ltd. ... Respondent
Mr. Deepak Jain and Mr. Tanay A.K. Pareek, Advocate, present for the applicant.
Mr. Vinay Garg, Advocate holding brief of Mr. Vipul Sharma, Advocate, present for respondent.
Hon'ble Sudhanshu Dhulia, J. (Oral)
1. This is an application filed by the applicant, under sub-Section (6) of Section 11 of the Arbitration & Conciliation Act, for appointment of an Arbitrator. Notices were issued to the respondent. Mr. Vinay Garg, Advocate is representing respondent before this Court, who has also filed its reply in the matter.
2. Heard Mr. Deepak Jain, learned counsel for the applicant, Mr. Vinay Garg, Advocate holding brief of Mr. Vipual Sharma, learned counsel for the respondent/SIIDCUL and perused the record.
3. The case of the applicant/petitioner before this is that both the parties entered into a lease deed on 18.06.2013 regarding an industrial plot given by State Infrastructure and Industrial Development Corporation (from hereinafter referred to as "SIIDCUL") in favour of the applicant i.e. M/s Golden Infracon Pvt. Ltd. Clause 9.2 of the Lease Deed dated 18.06.2013, which pertains to appointment of an Arbitrator, reads as follows:-
"9.2 All disputes and differences in relation to the applicability, interpretation, rights and obligations of the parties, hereunder and/or arising under these presents, shall be referred to a Sole Arbitrator to be nominated by the Managing Director of the Lessor within thirty (30) days from the date of receipt of a request for nomination of Sole Arbitrator, the Managing Director of the Lessor shall, nomination of Sole Arbitrator and issue communication in respect of the same to the parties. In case, the Sole Arbitrator is not nominated within a period stipulated 2 hereinabove, the parties will be at liberty to invoke the provision of the Arbitration and Conciliation Act, 1996 and any subsequent amendments thereto or enactment(s) in substitution thereof, for appointment of Sole Arbitrator."
4. For the development of the industrial plot, which was given by the respondent in favour of the petitioner, the respondent allegedly failed to perform its part by not creating the infrastructure work and other facilities as per the agreement. Consequently, the petitioner has given a notice to the respondent/SIIDCUL for appointment of an Arbitrator on 19.10.2016 as per Clause 9 of the lease deed/agreement dated 18.06.2013. The relevant portion of the notice reads as under:-
"It is hereby submitted that the GIPL has made huge investments towards site and machinery and altered their position as per the MOU between the parties; however, SIIDCUL did not honour its commitments as per the MOU resulting in inordinate delays that have seriously affected the capital of GIPL. Therefore, we are hereby invoking Arbitration as per Clause 9 of the Lease Deed dated 18.06.2013. It is pertinent to mention herein that the appointment of an arbitrator as per the Arbitration Clause has become ineffective after the Amendment of Arbitration and Conciliation Act in 2015; therefore, in view of the same we are suggesting appointment of Justice (Retd.) R.C. Chopra R/o A-384, Defence Colony, New Delhi - 110 024 as Arbitrator in the present matter.
You are hereby requested to give your consent to the said appointment within thirty (30) days from the date of this notice so that the proceedings can be commenced at the earliest."
(emphasis supplied)
5. Since the Arbitrator, as per the requisition of the petitioner, was not appointed, the petitioner was constrained to move the present application under sub Section (6) of Section 11 of the Arbitration & Conciliation Act, before this Court and the reply to it has also been filed by the respondent.
6. The main contention of the respondent is that the petitioner has not followed the procedure, which was liable to be done as per the agreement and only thereafter he could 3 approach this Court by filing present arbitration application under sub-clause (6) of Section 11 of the Arbitration & Conciliation Act. The contention of the counsel would be that Section 11(6) of the Arbitration & Conciliation Act clearly contemplates that before approaching this Court under sub- Section (6) of Section 11 of the Arbitration & Conciliation Act, the applicant was liable to have acted as per the procedure agreed upon by the parties. This according to the respondent has not been done inasmuch as the application moved by the petitioner before the Managing Director of SIIDCUL not for appointment of an Arbitrator, but for giving its consent for an Arbitrator, who was suo moto appointed by the applicant himself, is violation of the terms of the agreement.
7. Learned counsel for the petitioner, on the other hand, would argue that the procedure is not of much relevance, once the petitioner has approached this Court under Section 11(6) of the Arbitration & Conciliation Act. In order to substantiate his argument, he has relied upon following decisions:-
1. Punj Lloyd Ltd. Vs Petronet MHB Ltd. reported in 2006 (2) SCC 638.
2. Shankar Traders Vs Union of India & others reported in 2006 SCC Online Cal 350.
8. Perused the above judgments cited by the learned counsel for the petitioner and this Court is of the opinion that the facts of the present case are different from the above referred cases.
9. In any case, the learned counsel for the petitioner Mr. Deepak Jain would argue is that once the applicant has approached this Court by means of an application under Section 11(6) of the Arbitration and Conciliation Act, the appointing authority for the Arbitrator, as per the agreement, 4 cannot exercise its power for appointment of an Arbitrator for the simple reason that he has failed to discharge its liability for appointment of Arbitrator at the time when he was approached by the applicant as per the arbitration clause. There can be no dispute with this line of argument, which, in fact, is settled position of law.
10. The learned counsel for the respondent would, however, argue that the applicant has not exhausted its remedy under the agreement, inasmuch as he has not approach the appointing authority for appointment of an Arbitrator, as per the procedure laid down in the agreement. In fact, learned counsel for the respondent would argue that the application of the petitioner/applicant was not for appointment of an Arbitrator but for merely giving the consent of the Managing Director for appointment of an Arbitrator, which was nominated by applicant himself.
11. The learned counsel for the respondent has relied upon a decision of Hon'ble Apex Court in Indian Oil Corporation Ltd & others Vs Raja Transport Private Ltd. reported in 2009 (8) SCC 520 wherein it was laid down that the jurisdiction of the High Court will only arise if the procedure, as contemplated under the arbitration clause, has been completed. Since this has not been done, the application under Section 11(6) of the Arbitration & Conciliation Act is itself premature.
12. The above cited case (Indian Oil Corporation Ltd.) was a case where one of the parties, who had entered into an agreement with Indian Oil Corporation Ltd. had filed an application on the ground that he had no faith in the Director (Marketing), as he was the employee of Indian Oil Corporation Ltd., and therefore, without moving an application for appointment of Arbitrator before the appointing authority, 5 which was a part of agreement, he had straightway approached the High Court for appointment of an Arbitrator, where Arbitrator was appointed by the learned Chief Justice of the High Court. This was the order, which was ultimately came up before the Hon'ble Apex Court. In the said judgment in para Nos. 13 and 14, the Hon'ble Apex Court has held as under:-
"13. Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. It is quite common for governments, statutory corporations and public sector undertakings while entering into contracts, to provide for settlement of disputes by arbitration, and further provide that the Arbitrator will be one of its senior officers. If a party, with open eyes and full knowledge and comprehension of the said provision enters into a contract with a government/statutory corporation/public sector undertaking containing an arbitration agreement providing that one of its Secretaries/Directors shall be the arbitrator, he can not subsequently turn around and contend that he is agreeable for settlement of disputes by arbitration, but not by the named arbitrator who is an employee of the other party.
14. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement. The arbitration clause is a package which may provide for what disputes are arbitrable, at what stage the disputes are arbitrable, who should be the arbitrator, what should be the venue, what law would govern the parties etc. A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment procedure relating to the named Arbitrator contained in the arbitration clause."
13. In other words, it is a usual practice, in arbitration agreement with the Government or contract with the Public Corporation, an employee of the department is appointed as an Arbitrator, which is by now accepted practice. In any case, as far as bias on the part of the Arbitrator is concerned, this aspect is well taken care of under sub-Section (8) of Section 11 6 read with Section 12 and the Fifty Schedule to the Arbitration and Conciliation Act.
14. The Hon'ble Apex Court in the above cited decision, i.e. Indian Oil Corporation Ltd. (supra) had summarized the scope of Section 11 of the Arbitration and Conciliation Act. The relevant portion of the said decision, for our purpose, reads as under:-
"(iii) Where the arbitration agreement specifies the appointment procedure, then irrespective of whether the arbitration is by a sole arbitrator or by a three-member Tribunal, the Chief Justice or his designate will exercise power under sub-section (6) of section 11 if a party fails to act as required under the agreed procedure (or the parties or the two appointed arbitrators fail to reach an agreement expected of them under the agreed procedure or any person/institution fails to perform any function entrusted to him/it under that procedure).
(iv) .....
(v) Where the appointment procedure has been agreed between the parties, but the cause of action for invoking the jurisdiction of the Chief Justice or his designate under clauses (a), (b) or (c) of sub-section (6) has not arisen, then the question of Chief Justice or his designate exercising power under sub-section (6) does not arise. The condition precedent for approaching the Chief Justice or his designate for taking necessary measures under sub-section (6) is that
(i) a party failing to act as required under the agreed appointment procedure; or
(ii) the parties (or the two appointed arbitrators), failing to reach an agreement expected of them under the agreed appointment procedure; or
(iii) a person/institution who has been entrusted with any function under the agreed appointment procedure, failing to perform such function.
(vi) The Chief Justice or his designate while exercising power under sub-section (6) of section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause."7
15. Section 11 (6) of the Arbitration and Conciliation Act reads as under:-
"11. Appointment of Arbitrators:- (1) ..... (2) .....
(3) .....
(4) .....
(5) .....
(6) Where, under an appointment procedure agreed upon by the parties, -
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment."
16. The aforesaid provision clearly shows that the party can only approach the High Court where under an appointment procedure agreed upon by the parties, a party has failed to Act as required under that procedure. The fact of this case clearly demonstrate that the present applicant has not acted as per the procedure given under the arbitration clause, as they have not approached the Managing Director, SIIDCUL, as per the terms of the agreement. In case, the petitioner wants to invoke the arbitration clause, before approaching this Court, they are liable to avail the procedure in the arbitration clause.
17. The law laid down by the Hon'ble Apex Court in Indian Oil Corporation Ltd. (supra) squarely covered the facts of the present case. This Court is also of the opinion that since the petitioner has not invoked the arbitration clause as contemplated in the agreement, this Court declines to invoke its 8 jurisdiction under Section 11 of the Arbitration and Conciliation Act.
18. Accordingly, the arbitration application stands dismissed.
(Sudhanshu Dhulia, J.) 14.02.2017 Aswal