Madhya Pradesh High Court
National Council Of Y.M.C. As Of India vs Sudhir Chandra Datt on 12 September, 2012
HIGH COURT OF MADHYA PRADESH AT JABALPUR
A.C.NO.34/2012
National Council of Y.M.C. of India and another
-V/s -
Sudhir Chandra Datt
Present : Hon'ble Shri Justice Rajendra Menon.
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Shri R.N.Singh, Senior Counsel with Shri Abhishek Arjaria
for the applicants.
Shri A.K.Jain, Advocate for the respondent
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ORDER
(12-09-2012) Seeking constitution of an Arbitral Tribunal by invoking the jurisdiction of this court under Section 11(6) of the Arbitration & Conciliation Act, this application has been filed.
2. Facts in a nutshell necessary for deciding of the controversy indicates that the applicant/ association are the exclusive owners of Nazul Plot No.7/1, Block No.2, Civil Line, Jabalpur admeasuring 78,600 sq. ft. Parties in question entered into an agreement on 23-04-1996 vide Annexure A-1 and a supplementary agreement Annexure A-2 on 26-06-2005. In accordance to the aforesaid agreements, the applicant issued a power of attorney in favour of the non-applicant, who was given right to develop and make construction on the area in question in accordance to the terms 2 and conditions of the agreement, even though in the original agreement Annexure A-1, there was no arbitration clause but in the supplementary agreement Annexure A-2 dated 26-06-2005, there is arbitration clause 15 which reads as under :
"15. In case of any dispute between the parties with regard to the quality of construction, fixtures, accessories etc, the option and suggestion of the technical representative of the Party No.2 and 3 shall be binding on the Party No.1 if, it is not according to the specification provided by Party No.1. However, in case of any dispute both the parties will appoint one arbitrator each & their decision is final & binding on both the parties. If the President of the National Council of YMCA's of India fails to appoint an Arbitrator, then the parties to this supplementary agreement will be free to invoke the remedy under Arbitration and Conciliation Act, 1996."
According to the applicant the power of attorney was executed by the applicant in favour of non-applicant and by misusing the power of attorney, non-applicant had played fraud with the applicant, in as much as 34 flats constructed have been alienated to various individuals contrary to the agreement. Accordingly, contending that the non-applicant has breached the condition of the agreement, a dispute arose between the parties and therefore, a legal notice was sent by the applicant to the non-applicant on 24-05-2010 vide Annexure A-3. In the legal notice sent, the applicant had pointed out various irregularities committed in the matter of making construction, allotment of flats and office space to various individuals contrary to 3 the agreement . When the aforesaid legal notice was sent, the non- applicant invoked the arbitration clause and sent a letter Annexure A-4 on 04-06-2010 and appointed one Anind Choudhary as his arbitrator and requested the applicant to nominate their arbitrator as per the agreement. It is therefore, clear that the non-applicant invoked the arbitration clause on the ground that a dispute has arisen between the parties. When the applicant did not appoint arbitrator in accordance with the arbitration agreement i.e. as per clause 15, the non-applicant approached this court in a proceedings under Section 11 of the Arbitration & Conciliation Act, filed Arbitration Case No.47/2010 (Sudhir Chand Datt Vs. National Council of Y.M.C.A.'s and another) and sought a direction for appointment of an arbitrator. When the said proceedings was pending, the applicant appointed one Shri K.S.Bhati, resident of New Delhi as their arbitrator and accordingly finding both the parties to have appointed their arbitrators as per Clause-15 the case was disposed of by this court on 03-05-2011 vide Annexure A-6 .
3. Thereafter correspondences took place between the arbitrators namely Shri K.S.Bhatia and Shri Anind Choudhary. Initially Shri K.S.Bhatia, Arbitrator of the applicant sent a letter dated 27-04-2011 to Shri Anind Choudhary vide Annexure A-7 proposing the name of Justice D.M.Dharmadhikari, Former Judge of Supreme Court as the third Arbitrator. In reference to this Shri Anind Choudhary submitted a reply and communicated to Shri K.S.Bhatia vide letter dated 10-05-2011 indicating a contrary opinion stating 4 that he did not agree with the proposal for appointment of Hon'ble Justice Shri D.M.Dharmadhikari as the 3rd Arbitrator. Thereafter, certain correspondence took place and when the parties did not agree to appointment of a third arbitrator, the matter again came up before this court at the instance of the applicant in a proceeding under section 11(6) of Arbitration and Conciliation Act, 1996, this was registered as A.C.No.598/2011 and this court vide order dated 05-03-2012 Annexure A-12 appointed Hon;ble Justice Shri D.M.Dharmadhikar, a retired judge of the Supreme Court as the third arbitrator. Records indicate that when the proceedings were held before Hon;ble Justice Shri D.M.Dharmadhikari on 07-04-2012 vide Annexure A-14, Shri K.S.Bhatia appeared but the second arbitrator Shri Anind Choudhary did not appear instead the representative of non-applicant Shri Sudhir Chandra Datt appeared and nominated one Shri Siddharth Datt, Advocate as his arbitrator on the ground that Shri Anind Choudhary has declined to act as an Arbitrator due to his ill health. Thereafter learned arbitrator Shri D.M.Dharmadhikari found that there was some objections with regard to his appointment by the non-applicant and after taking note of the stipulation contained in clause-15 of the supplementary agreement and the provisions of Section 10(1) of the Arbitration & Conciliation Act, 1996 which does not provide for appointment of two arbitrator i.e. even number of arbitrator, referred the matter back to this court, as a result this application has now been filed by the applicant to resolve the dispute.
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4. Shri R.N.Singh, learned Senior Counsel assisted by Shri Abhishek Arjaria, submitted that now as the non-applicant has nominated another arbitrator in place of their original arbitrator Shri Anind Choudhary, which is not permissible, and by placing reliance on a judgment of the Supreme Court in the case of S.B.P. And Company Vs. Patel Engineering Limited and another (2009)10 SCC 293 and Section 15 of the Arbitration and Conciliation Act, 1996 argued that once the arbitrator is appointed by one of the party and when the said arbitrator refuses to discharge the duties of arbitration, then the party does not have any right to substitute the arbitrator, accordingly, it was emphasized that as Shri Anind Choudhary has refused to discharge the duties of an arbitrator, now the non-applicant cannot substitute him by appointing Shri Siddharth Datt as their arbitrator and therefore, the arbitration proceedings shall now proceed with the sole arbitrator i.e. Shri K.S.Bhatia. Accordingly Shri R.N. Singh, learned Senior Counsel has emphasized by taking me through the principles of law laid down in the case of S.B.P. And Company(supra) to contend that Shri K.S.Bhatia be permitted to discharge the duties of a sole arbitrator in view of the legal position. That apart inviting my attention to the objections raised by the non-applicant in their reply to the effect that there are serious dispute between the parties and therefore, these disputed questions can not be resolved in the arbitration proceedings, Shri Singh, relied on the provisions of Section 16 of the Arbitration and Conciliation Act,1996 and submitted that all these questions can be adjudicated upon by the arbitrator and for 6 the said purpose invoking the jurisdiction of the Civil Court is not necessary. Emphasizing that the arbitration agreement has been entered into between the parties and therefore, the dispute can only be resolved only through arbitration. The first prayer made by Shri R.N.Singh was that Shri K.S.Bhatia be appointed as the sole arbitrator and he be permitted to proceed in the matter, in the alternate it was argued by him that if this court for any reason concludes that Shri K.S.Bhatia cannot discharge the duties of arbitrator, then a retired High Court Judge be appointed as Arbitrator and in this regard indicated certain suggestions .
5. Shri A.K.Jain, learned counsel for the respondent refuted the aforesaid contentions and took me through the averments made by the applicant vide a application filed in a proceedings held before the District Judge, Jabalpur under section 9 of the Arbitration and Conciliation Act, 1996 i.e. Annexure R-1 and emphasized that it was the case of the applicant in the said proceeding that the non-applicant has committed fraud in executing 34 sale deeds in favour of different purchasers, the sale deeds were obtained by use of fraudulently means, accordingly he emphasized that as there are serious dispute between the parties which are complicated in nature and it involved questions of law and technicalities the same cannot be adjudicated by the Arbitrator and in view of the law laid down by the Supreme Court in the case of N.Radhakrishnan Vs. Maestro Engineers and others (2010) 1 SCC 72, the parties should now resort to the remedy available of filing civil suit as the Arbitrator will not be in a position to resolve 7 such a dispute . That apart Shri Jain tried to justify the action of the applicant in nominating Shri Siddharth Datt and tried to emphasize that earlier arbitrator Shri Anind Choudhary has withdrawn from the proceedings, therefore, substitution of the arbitrator is permissible, accordingly emphasizing that the dispute between the parties are required to be adjudicated by recording of evidence and a inquiry into complicated questions of law and fraud are to be looked into, the dispute cannot be adjudicated upon by the Arbitrator, Shri Jain submitted that a suit is the only remedy for resolution of the dispute. In the alternate he submitted that if a arbitrator is to be appointed , he suggested the name of one retired High Court Judge .
6. Having heard the learned counsel for the parties and on consideration of the rival contentions and the grounds raised, I am of the considered view that the following questions arise for consideration in this application.
(i ) Whether the non applicant is entitled to substitute the original arbitrator by appointing Shri Siddharth Datt as the new Arbitrator and whether the same is permissible in view of provisions of section 15 and the objections raised by Shri R.N.Singh, learned Senior Counsel on the basis of the law laid down in the case of Patel Engineering (supra).
(ii) The second ground to be considered is as to whether the appointment of arbitrators 'even in number' which is prohibited by Section 10(1) of the Arbitration and Conciliation 8 Act, 1996 makes the entire arbitration clause invalid and unenforceable.
(iii) The third question is as to what would be the effect of an arbitration agreement, which contemplates appointment of Arbitrators, even in number and the consequence thereof.
(iv) The next question would be as to in facts and circumstances of the present case what direction should be issued in the matter.
(v) The last question is with regard to the objection raised by Shri A.K.Jain, learned counsel for the respondent with regard to resorting to the remedy of filing civil suit on the ground that the dispute in question cannot be adjudicated upon by arbitration.
7. In view of the legal questions involved, before taking up for consideration, question no.1, it is thought appropriate to take up question nos. 2, 3 and 4 for consideration together.
8. If the arbitration clause as reproduced herein above it taken note of, it would be seen that the arbitration clause contemplates a provision for appointing one Arbitrator by each of the parties, meaning thereby that only two arbitrators are to be appointed. Under Section 10(1) of the Arbitration and Conciliation Act, 1996, appointment of arbitrator, even in number is prohibited and the consequence of such appointment is contemplated in sub section (2) thereof. The question as to whether the arbitration agreement becomes invalid only because arbitrations, even in number are appointed is already considered and decided by the Supreme Court 9 in the case of M.M. T.C.Ltd. Vs. Sterlite Industries(India) Ltd. AIR 1997 SC 605. In the aforesaid case this question has been considered and it has been held that a arbitration agreement between the parties even if it contemplates appointment of arbitrators even in number, the same will not become invalid. It has been held that the arbitration agreement can still be given effect to in accordance to the provisions of section 11 of the Arbitration and Conciliation Act, 1996 and in view of the provisions of sub section 2 of section 10, the matter can be proceeded with. Similar view have been taken again by the Supreme Court in the case of Narayan Prasad Lohia Vs. Nikunj Kumar Lohia and others, AIR 2002 SC 1139 and in para 17 it has been held that an arbitration agreement, merely because it contemplates for appointment of arbitrators, even in number, will not become illegal or invalid. In view of the above, it is held that merely because the arbitration agreement contemplates appointment of two arbitrators i.e. even number of arbitrators, the arbitration agreement will not become invalid. In this regard the principles laid down in the case of Sri Venkateshwara Construction Co. V. Union of India and others, AIR 2001 Andhra Pradesh 284 may also be taken note of where in it has been held by the Andhra Pradesh High Court that in the event, when even number of arbitrations are appointed, the arbitration in such cases would be by a sole arbitrator in view of sub section 2 of Section 10 and for taking further action in the matter, the procedure contemplated under section 11 will have to be followed. It is, therefore, clear that the arbitration agreement in 1 the present case which contemplate appointment of even in number arbitrators cannot be termed as an invalid agreement, the arbitration clause can still be given effect to.
9. Having held so, the next question would be as to what steps should be taken for proceeding in the matter. Once it is held that the arbitration agreement is valid, to answer the next question it is necessary to take note of the provisions of sections, 11, 14 and 15 of the Arbitration and Conciliation Act, 1996. If the provisions of section 11 is read alongwith section 15, it would be clear that if an arbitration agreement contemplates for appointment of named arbitrators and if the arbitrators so appointed are unable to discharge their function then the power under section 11(6) has to be invoked and it is the Chief Justice or the Judge designated by the Chief Justice , who is required to be taken action in the matter. In the present case, the arbitration agreement i.e. clause-15 meets the requirement of being a agreement as contemplated under section 9 of the Act, read alongwith requirement of section 2(1) (a). If the appointment procedure contemplated in the arbitration agreement fails then in view of Section-11 it is the Chief Justice or his nominee who is to take necessary action in the matter. Accordingly, I am of the considered view that merely because the parties have entered into an by agreement for appointing two arbitrators and when the appointment of such arbitrator is prohibited under sub clause -1 of section 10, the dispute has to be adjudicated by a sole arbitrator in accordance to the provisions of section 10(2) and the power to appoint such an arbitrator has to be undertaken 1 in accordance to the procedure contemplated under section 11(6). The contention of Shri R.N.Singh to the effect that sole arbitrator in such case would be arbitrator appointed by one of the parties is not correct, if in view of the prohibition contained in sub section 1 of section 10 the arbitration agreement entered into between the parites cannot be given effect to then the Arbitral Tribunal will have to be constituted in accordance to the procedure contemplated under section 11(6). When an arbitration agreement makes a provision for appointment of named persons as arbitrator and when arbitration in accordance to the said provision is not possible due to any reason , the arbitration clause is not rendered redundant. In such cases, the matter has to be proceeded in accordance to the requirement of Section 11(6) and the arbitrator has to be appointed in accordance to the procedure contemplated therein because appointment in accordance to the procedure agreed to between the parties is not permissible. In this regard principles laid down by the Bombay High Court in the case of Smt. Satya Kailashchandra Sahu and others V. M/s Vidarbha Distillers, Nagpur and others, AIR 1998 Bombay 210 may be taken note of
10. Having so held so, I may now consider question no.1 as formulated herein above. Once it is found by this court that the appointment of even number arbitrators as done in this case is not permissible and when the arbitrators as are appointed by the parties cannot discharge the function, when an arbitrator is required to be appointed by this court exercising power under section 11(6) I am of the considered view that question no.1 as 1 framed for the present is not at all relevant, it is only of a academic interest now and need not be gone into in the present case.
11. Shri A.K.Jain has made submission with regard to nature of dispute and has raised contentions that the dispute can not be adjudicated by arbitration. The agreement between the parties is with regard to development of the property and it is the case of the applicant that as the property has not been developed in accordance to the agreement , certain flats have been sold on the basis of power of attorney contrary to the agreement and certain development has been done contrary to the agreement. If the dispute between the parties as is made out from the record is taken note of, it would be seen the dispute is not so complicated in nature that it can be adjudicated upon only by the Civil Court, the nature of the inquiry contemplated in the case of N.Radhakrishnan(supra) as relied by Shri A.K.Jain is not existing in the present case. The dispute between the parties in the present case is not so complicated or technical in nature that it cannot be resolved by the arbitrator, that also when a High Court Judge (Retd.) is to be appointed as a arbitrator. That being so I am of the considered view that it is not necessary to take recourse to the remedy of filing civil suit instead arbitrator can be appointed in the matter. Certain other objections have been raised by Shri A.K.Jain with regard to the limitation in the matter of raising the dispute i.e. with regard to the right of the Arbitrator only to adjudicate certain disputes in view of the agreement between the parties and 1 claim of the non-applicant travelling beyond the said agreement. It is seen that the agreement between the parties contemplates various disputes pertaining to quality of construction, fixtures, accessories etc. which can be adjudicated by appointing an arbitrator and as the objections in this regard can be raised before the Arbitrator and it would be for the Arbitrator to consider and decide all these questions.
12. Keeping in view the totality of the circumstances and the different opinion with regard to a person to be appointed as arbitrator, I am of the considered view that in the facts and circumstances of the case, interest of justice requires that a person other than the one suggested by the parties should be appointed to adjudicate the dispute between the parties. In view of the above Hon'ble Justice S.K.Pandey, Former Judge of this court stationed at Jabalpur is appointed as Arbitrator to adjudicate the dispute between the parties.
13. The application is accordingly disposed of.
(RAJENDRA MENON) JUDGE hsp