Delhi High Court
Meryfur Industries Ltd. vs Union Of India on 19 January, 1998
Equivalent citations: AIR1998DELHI215, AIR 1998 DELHI 215, (1998) 33 ARBILR 127
Author: K.S. Gupta
Bench: K.S. Gupta
JUDGMENT K.S. Gupta, J.
1. This order will govern the disposal of OMPS No.76/89,77/89,78/89.
2. OMP 76/89 under Section a of the Arbitration Act was filed interalia alleging that in response to an invitation of tender, the petitioner submitted tender which was accepted by respondent vide rate contract No.ES- 3/RC-1432/PVS(ALUM)/Cable/85/83/Meryfur/1337/COAD dated 17th February, 1986 for supply of cables for electric power and lighting in different sizes. Contract in Form No. DGS&D-68 containing arbitration clause No.24 was executed. Certain disputes arose between the parties and to resolve them the respondent appointed Dr.B.N. Mani as the so to garb arbitrator who entered upon the reference in arbitration case being No. 92-B/88. After Dr. Mani retired from the post of Additional Legal Adviser, he also resigned as arbitrator. Thereafter, petitioner though M/s. Signhania & Company sent a notice under Section 8 of the Act to DGS&D who had to fill up the vacancy under the arbitration clause for appointment of another arbitrator. Despite service of that notice, no arbitrator was appointed within the statutory period of 15 days by DGS&D and as such it had forfeited its right to appoint an arbitrator. It was prayed that an arbitrator be appointed by the Court to adjudicate upon the disputes between the parties.
3. In OMS 77/89, petitioner's under which was accepted by the respondent vide rate contract No. ES/-3/RC-1430?UGAC/85-86/III/Meryfur/1419/COAD dated 19th March 1986 was for supply of underground armored PVC insulated and PVC (Sheathed) cables. In OMP 78/89 tender accepted vide rate contract No. ES- 3/RC-1431/PVC(Alum)Cable/85-86/33/Meryfur/COAD/1368 dated 31st January, 1986 was for supply of nonweather proof unarmored PVC insulated (unsheathed) cables. Averments made in aforesaid two OMPs are identical to that made in OMP 76/89 excepting that the number of arbitration case in OMP 77/89 is 76-B/88 while in OMP 78/89 it is 75-B/88.
4. In identical replies filed in the three cases, it is alleged by the respondent that it has already appointed R.K.Gupta, Additional Legal Adviser as the arbitrator, and therefore, the petitions have become infructous. It is denied that the respondent had forfeited its right to appoint arbitrator,as alleged.
5. In OMP No.77/89, O.A Khan, Deputy Director (Supplies) of DGS&D field his affidavit dated 15.1.91. It is stated that B.N. Mani, Additional Legal Adviser was working as sole arbitrator for deciding the disputes between the parties and on attaining super annuation he retired in February 1989. In his place, R.K. Gupta was appointed on 10.8.89 by DGS&D. Although the petitioner field petitions before the Court for appointment of arbitrator but it has been appearing before R.K. Gupta, arbitrator without any protest. On promotion of R.K. Gupta, C. Achutan was appointed as arbitrator by DGS&D on 31.10.90 Petitioner also appeared before the new arbitrator and never raised any protest before him. Similar is the position in OMPS 76/89 & 78/89 and this affidavit may be read in evidence in those petitions too.
6. R.L. Gupta one of the registered partners of the petitioner in the counter affidavit dated 6th May, 1991, has not disputed the factual statement made in the affidavit of O.A. Khan in regard to appointment of R.K. Gupta and C.Achutan as arbitrator on the dates given. However, it is stated that after the filing of petition the petitioner has been appearing before the arbitrators under protest. Additional affidavit dated 26th May,1992 was also filed by aforesaid R.L. Gupta wherein he has averred that R.N. Gupta, arbitrator, after having entered upon the reference vide order dated 4.7.89, fixed the date of hearing as 24.7.89. on 11.7.89. petitioner filed an application before him stating that his appointment as arbitrator is invalid and in view of the pendency of the petition filed under Section 8 of the Act, arbitration proceedings be adjured sine die. Application was received by the said arbitrator on 13.7.89 but he did not pass any order thereon till August 31, 1989 when it was rejected. Although some hearings took place before the said arbitrator but every time the petitioner appeared under protest though not so recorded except in the order dated 23.5.90 whereby consent was accorded by the petitioner to enlarge the time for marking the award without prejudice to its rights and under protest C.Achuthan who was appointed in place of R.K. Gupta as arbitrator, entered upon the reference on 29.10.90. It was pointed out on behalf of the petitioner to C.Achuthan that the appearance by the petitioner was under protest but that fact was not recorded by him. His term expired on 26.6.91. Thereafter petitioner did not given its consent to the enlargement of time and petition was, therefore, adjured sine die.
7. As us manifest from the order dated 7.7.92. respondent did not chose to file any counteraffidavit to the said additional affidavit dated 6th May, 1991 of R.L. Gupta.
8. Submission advanced by the learned counsel of the petitioner was that as DGS&D failed to appoint arbitrator in place of B.N. Mani within 15 days of the receipt of the petitioner's notice, it forfeited its right to appoint arbitrator and it is now the court which has to appoint arbitrator (s) under Section 8(2) of the Arbitration Act. Strong reliance was placed on the decision in U.O.I. & Anr. Vs M/s. Amarnath Aggarwal Construction Pvt. Ltd., 1988(2) Arb L.R. 337 and Nandyal Coop. Spinning Mills Ltd. Vs. K.V. Mohan Roa, . On the contrary, contention Advanced by the learned counsel of the respondent was that in view of subclause(3) of clause 24 (arbitration clause) of the agreement, no person other than appointed by DGS&D can act as arbitrator and if for any reason that was not possible, the matter is not to be referred to arbitration at all and the petitions are thus not maintainable. Reliance was placed on U.O.I. Vs. M/s. Reghunath Singh and Co. , M/s. Prabhat General Agencies etc. Vs. U.O.I. & Anr. , & U.O.I. Vs. Lingraj Dash, AIR 1981 (NOC) 227 (Orissa).
9. Sub-Clause (i) & (iii) of clause 24 of the agreement entered into between the parties which are relevant read thus:-
"(i) In the event of any question dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of an officer in the Ministry of Law, appointed to be the arbitrator by the Director General of Supplies & Disposals. It will be no objection that the arbitration is a Government Servant that he had to deal with the matters to which the contract relates or that in course of his duties as a Government servant he has expressed views on all or any of the matters in disputes or difference. The award of the arbitration shall be final and binding on the parties to this contract.
(ii).....
(iii) It is further a term of this contract that no other the person appointed by the Director General of Supplies & Disposal as a foresaid should act as arbitrator and that, if for any reason that is not possible, the matter is not to be referred to Arbitration at all."
10. In Nandayal Spinning Mills' case (supra) wherein similar point arose for determination clauses 65.1 and 65.2 of the contract read thus:
65.1 Expect where otherwise provided in the contract all disputes or question relating to... shall be referred to the sole arbitration of the person appointed by the administrative head of owner. There will be no objection to any such appointment that the arbitrator so appointed is the owner's representative that he had to deal with the matters to which the contract relates and that in the course of his duties as owner's representative he had expressed views in all or any off the matters in dispute or difference....it is also a term of this contract that no person other than a person appointed by such administrative head as aforesaid should as Arbitrator and if for any reason it is not possible the matter is not referred to the arbitration at all...
65.2 Subject to as aforesaid the provisions of the Arbitration Act, 1940 (for short 'the Act' added) or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding as under this clause."
11. In parts 10 & 11 on pages 660 & 661 of the report it was held thus :- "10. The application for appointment of an arbitrator is not maintainable when an arbitrator has already been appointed and the applicant has been informed of the said facts before the expiry of 15 days as envisaged under Section 8(1)(a). We have seen the arbitral agreement in Clause 65.1 and of applicability of the Act in Clause 65.2 thereof the agreement provided that after the disputes had arisen and notice given by either party, power has been given to the administrative head of the appellant to appoint an arbitrator. Admittedly the respondent did give notice twice requesting the appellant to nominate an arbitrator and within 15 days time no action thereunder had been taken. The replies there to were only the the matter was under consideration. After the expiry of the period prescribed the administrative head denuded his power under clause 65.1 of the contract to appoint the arbitrator. Long after the expiry of 15 days time the respondent had invoked the jurisdiction of the trial court which is competent to deal with the matter. It had given an opportunity to the appellant to contest the claim. Appellant had intimated the appointment of Yethiraj only long after the expire of the period....
11. It would thus be clear that if no arbitrator had been appointed in terms of the contract within 15 days from the date of receipt of the notice, the administrative head of the appellant had abdicated himself of the power to appoint arbitrator under the contract. The court gets jurisdiction to appoint an arbitrator in place of the contract by operation of Section 8(1)(a). The contention of Shri Rao, therefore, that since the agreement postulated preference to arbitrator appointed by the administrative head of the appellant and if he neglects to appoint, the only remedy open to the contractor was to have recourse to civil suit is without force. It is seen that under the contract the respondent contracted out from adjudication of his claim by a civil court. Had the contract provided for appointment of a named arbitrator and the named person was not appointed, certainly the only remedy left to the contracting party was the right to suit. That is not the case on hand. The contract did not expressly provided for the appointment of a named arbitrator instead power has been given to the administrative head of the appellant to appoint sole arbitrator. When he failed to do so within the stipulated period of 15 days enjoined under Section 8(1)(a), then the respondent has been given right under Clause 65.2 to avail the ready under Section 8(1)(a) and request the court to appoint an arbitrator. If the contention of Shri Rao is given acceptance it would amount to putting a premium on inaction depriving the contractor of the remedy of arbitration frustrating the contract itself."
12. In M/s. Amarnath Aggarwal's case (supra) wherein arbitration clause was identical to aforesaid sub class (iii) of clause 24, view taken by the Single Judge was that if on receipt of notice from one party, the other party fails to appoint an arbitrator within 15 days the Court can appoint an arbitrator under Section 8(2) of the Act.
13. This brings me to the decision in M\s. Reghunath Singh's case (supra) relied on behalf of the respondent. In this case, arbitration clause in the contract provided for referring the disputes for arbitration to the Chief Engineer/Director of Storage, Ministry of Food Government of India and his decision was to be final and binding. However the post of Director of Storage, Ministry of Food was abolished and no person holding that post was available for arbitration. Chief Engineer though available refused to act. On respondent company moving the Court under Section 8 of the Act to appoint another arbitrator, the contention put forward on behalf of the appellant was that when there was a named arbitrator even thought he was named by office it was not open to the Court to supply vacancy in his place under Section 8(1)(b) of the Act. However thus argument was repelled holding that the court had no power to supply the vacancy under section 8(1)(b), only if the arbitration agreement did show that the parties did not intend to supply the vacancy and if no such intention could be culled out from the arbitration clause, the court could supply the vacancy. Reliance was placed on the decision in Prabhat General Agencies case (supra). As is evident from the aforementioned arbitration clause No. 24 intention of the parties in these petition was that without resorting to litigation in ordinary course disputes in question be decided by arbitration. Both the said decisions, therefore, are of no assistance to the respondent.
14. In Lingaraj Dash case (supra) only the head note is reported. One does not know what were the contents of arbitration clause under which the applicability of Section 8 of the Act was ruled out.
15. It may be noticed that the aforementioned subclause (iii) of clause 24 (arbitration clause) is identical to clause 65.1 of the contract in Nandyal Coop. Spining Mills Ltd.'s case (supra). It is admitted by the respondent that appointment of R.K. Gupta in place of B.N. Mani as arbitrator was made by DGS&D much beyond the period of 15 days from the receipt of the petitioner's notice under Section 8 of the Act. Thus the ratio in Nandyal Coop, Mills's case (supra) applies on all fours to the fact of this case. In these petitions court gets the jurisdiction to appoint arbitrator(s) by operation Section 8(1)(b) of the Act. Submission referred to above advanced on behalf of the respondent is, therefore, replied being without merit.
16. Yet another argument advanced by the learned counsel for the respondent was that the petitioner having appeared without any demur before R.K. Gupta and C. Achutan, arbitrators, cannot seek fresh appointment of arbitrator. Submission has no force. In the additional affidavit dated 26th May, 1992 of R.L. Gupta, it is stated that appearance on petitioner's behalf before the aforesaid arbitrators was made under protest but that fact was not recorded every time by them. Respondent has not chosen to controvert these averments by filing counteraffidavit. Application dated 11.7.89 filed before R.K. Gupta by the petitioner immediately after his appointment as arbitrator and the proceedings dated 15.9.89 and 23.5.90 also go to indicate that the appearance of the petitioner before the arbitrators was under protest. Moreover, participation in the proceeding before the aforesaid two arbitrators whose appointments were contrary to law will not come in the way of the petitioner in seeking appointment of arbitrator by the Court under Section 8 of the Act.
17. For the foregoing discussion, OMPS 76/89, 77/89 & 78/89 are allowed. Justice G.C. Jain retired Judge of this Court is appointed as arbitrator in place of C. Achutan to adjudicate upon the disputes between the parties in these petitions. He will fix his fee and make and publish the award within the statutory period. No order as to costs.