Delhi High Court
Avtar Singh Chadha vs Municipal Corporation Of Delhi And Anr. on 11 March, 1998
Equivalent citations: 72(1998)DLT541
Author: Lokeshwar Prasad
Bench: Lokeshwar Prasad
JUDGMENT Lokeshwar Prasad, J.
1. The petitioner, named above, in his capacity as the sole proprietor of M/s. Bharat Engineers & Consultants, has filed the present petition under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Act'), averring that the respondents had invited tenders for construction of a Pucca School Building at M.C Primary School, Sheikh Sarai, Phase-II, New Delhi. It is stated that the petitioner tendered for the construction of the said building and his tender was accepted by the respondents vide letter dated 8th May, 1995. It is further stated that an Agreement for the construction of the above said school building was entered into between the parties which contained an arbitration clause (Clause No. 25) providing for an Arbitration in the event of disputes arising between the parties. It is stated that disputes as detailed in para 4 of the petition, have arisen between the parties and the petitioner vide letter dated 25th January, 1997 invoked the arbitration clause and requested respondent No. 2 to appoint an Arbitrator in terms of the arbitration clause to adjudicate upon the disputes. It is alleged that despite receipt of the above mentioned communication the respondents have failed to appoint an Arbitrator and issued a notice in an illegal manner terminating the contract. It has been prayed that an Arbitrator be appointed in terms of the arbitration clause to adjudicate upon the disputes, referred to in para 4 of the petition.
2. Notice of the petition was issued to the respondents who have filed a reply stating therein that the petition, filed by the petitioner, virtually has become infructuous as the respondents have already appointed Shri K.S. Sandhu, Chief Engineer (North) as the Sole Arbitrator in terms of Clause 25 of the Agreement dated 23rd August, 1995. The respondents alongwith the reply have annexed a copy of Notification dated the 11th July, 1997 (Annexure R-1) wherein the appointment of said Shri K.S. Sandhu, Chief Engineer (North) as the Sole Arbitrator has been notified by the Commissioner, Municipal Corporation of Delhi. It is stated in the reply, filed on behalf of the respondents, that the present petition, filed by the petitioner, is devoid of substance and the same deserves to be dismissed with exemplary costs.
3. The petitioner has filed a rejoinder to the reply filed on behalf of the respondents. In the rejoinder, filed on behalf of the petitioner, the fact regarding the appointment of an Arbitrator on 11th July, 1997 has been admitted but it is contended that since no Arbitrator was appointed in response to petitioner's letter dated 25th January, 1997, the respondents have abdicated their right to appoint an Arbitrator and that the appointment made by the respondent, is, therefore, not valid. In the rejoinder, filed on behalf of the petitioner, other pleas taken by the respondents, have been controverted and the contents of the petition have been reiterated.
4. I have heard the learned Counsel for the parties at length and have also carefully gone through the documents/material on record. During the course of arguments the learned Counsel for the petitioner contended that despite specific request for the petitioner, the respondents refused to act and did not appoint any Arbitrator within the stipulated time in terms of the arbitration clause and on their failure to do so the arbitration clause stands exhausted and the Court gets jurisdiction to appoint an Arbitrator in terms of the arbitration clause contained in the Agreement. The learned Counsel for the petitioner in support of her above contention, has placed reliance on two decisions of the Supreme Court in case Nandyal Co-operative Spinning Mills Ltd. v. K.V. Mohan Rao, 1993 (1) Arb. L.R. 469; G. Rama Chandra Reddy & Co. v. Chief Engineer, M.E.S. Madras Zone, 1994 (2) Arb. L.R. 61, and on a decision of this Court in case K.C. Chhibber v. DDA, 1997 (2) Arb. L.R. 329. On the other hand, it was submitted by the learned Counsel for the respondents that in terms of the arbitration clause, the respondents have already appointed an Arbitrator and with the appointment of the Arbitrator by the respondent, the relief claimed by the petitioner in the present petition stands fully satisfied and the present petition, filed by the petitioner, virtually has become infructuous. It was further stated by him that once the Arbitrator has been appointed, his authority cannot be revoked because the Act does not contain any provision for revoking the authority of an appointed Arbitrator. It was stated by him that under the Arbitration Act, 1940 such a provision was there in Section 8 wherein the power was given to the Court but no such provision exists in the Act and in the absence of any such provision, it is not within the competence of this Court to revoke the authority of the appointed Arbitrator and to appoint a new Arbitrator in his place. It was argued by him that the present petition, filed by the petitioner, after the appointment of an Arbitrator by the respondents, in terms of the arbitration clause, virtually has become infructuous and the same deserves to be dismissed with costs.
5, As already stated the present petition has been filed by the petitioner under Section 11 of the Act which reads as under:
"Appointment of Arbitrators--(1) A person of any nationality may be an Arbitrator, unless otherwise agreed by the parties.
(2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the Arbitrator or Arbitrators.
(3) Failing any agreement referred to in Sub-section (2), in an arbitration with three Arbitrators, each party shall appoint one Arbitrator, and the two appointed Arbitrators shall appoint the third Arbitrator who shall act as the Presiding Arbitrator.
(4) if the appointment procedure in Sub-section (3) applies and --
(a) a partly fails to appoint an Arbitrator within thirty day from the receipt of a request to do so from the other party; or
(b) the two appointed Arbitrators fail to agree on the third Arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in Sub-section (2), in an arbitration with a Sole Arbitrator, if the parties fail to agree on the Arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(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 proceeding; 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 Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by Sub-section (4) or Sub-section (5) or Sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an Arbitrator, shall have due regard to --
(a) any qualifications required of the Arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial Arbitrator.
(9) in the case of appointment of sole or third Arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an Arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by Sub-section (4) or Sub-section (5) or Sub-section (6) to him.
(11) Where more than one request has been made under Sub-section (4) or Sub-section (5) or Sub-section (6) to the Chief Justice of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India."
(b) Where the matters referred to in Sub-sections (4), (5), (6), (7), (h) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of the High Court within whose local limits the principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court.
6. For the purpose of the present petition, the relevant provisions are Sub-section (2) and Sub-section (6) of the above mentioned Section 11. Sub-section (2) allowed liberty to the parties to mutually agree upon a procedure for the 'appointment of Arbitrators'. They may agree that the Arbitrator or Arbitrater may be appointed by a 'third person' designated by them or they may themselves appoint. They may agree upon arbitration by a Sole Arbitrator or by a number of Arbitrators. Sub-section (6) does not deal with the 'appointment of Arbitrators'. It deals with making a request for taking necessary measures in case of failures on the part of either --
(a) a party or the Arbitrators under Sub-section (3) or (4) as the case may be, or (b) of the parties under Sub-section (5), or (c) of the person or the institution under Sub-section (4) or (5) to whom the Chief Justice has delegated his power.
7. In short the provisions of Sub-section (6) come into operation where the procedure to appoint is agreed but there is failure in acting upon it. The main grievance of the petitioner, as stated by the learned Counsel for the petitioner, is that as the respondents have failed to appoint an Arbitrator within the stipulated time, the respondents have forfeited their right to appoint an Arbitrator and now the Arbitrator is to be appointed by the Court. In view of the above argument advanced at the bar by the learned Counsel for the petitioner, it is to be seen as to whether there is any such stipulation specifying or laying down the time-limit within which the Arbitrator is to be appointed by the concerned authority in terms of the arbitration clause. In the Statute itself, as is evident from the wordings of Section 11, no time-limit is specified as has been done in Section 8 of the Arbitration Act, 1940 for appointing an Arbitrator. In the arbitration clause of the agreement, entered into between the parties, no such time-limit has been prescribed. Even in the letter dated the 25th January, 1997 whereby the petitioner invoked the arbitration clause and requested respondent No. 2 to appoint an Arbitrator no such time-limit has been specified by the petitioner for the appointment of an Arbitrator. On a perusal of the above said document, a copy of which is at Pages 33 and 34 of the paper-book (documents file), it is apparent that a simple request to appoint an Arbitrator in terms of the arbitration clause has been made by the petitioner to respondent No. 2 without specifying any time-limit. In the presence of the above facts, the argument advanced by the learned Counsel for the petitioner, that the appointment was not made within the stipulated time-limit, in my opinion, is devoid of substance. The case law, relied upon by the learned Counsel for the petitioner, also in no way helps the case of the petitioner because the same relates to the interpretation of the provisions of Section 8 and Section 20 of the Arbitrates Act, 1940 which stands repealed with the coming into force pf the Act and in the present Act no such analogous provision exists. Moreover, as per settled law culled out from various decisions arbitration, as a mode for settlement of disputes between the parties, has a tradition in this country. It has a social purpose to fulfill. Today it has great urgency when there has been an explosion of litigation in the Courts of Law established by the sovereign power. The 'arbitration' is supposed to be entrusted to individuals/institutions appointed/chosen by the parties themselves in accordance with the agreement arrived at between them and generally speaking the Courts must respect the choice of the Arbitrators made by the parties unless there are cogent reasons requiring interference by the Court. In the instance case, the only objection to the appointment of the Arbitrator, appointed by the respondent Commissioner, MCD is that the appointment has not been made within the stipulated time. Nowhere it is stated that the Arbitrator appointed by respondent/MCD is biased or that the petitioner would not get justice from him or the same is not in conformity with the arbitration clause of the Agreement. In other words, the challenge to the appointment of the Sole Arbitrator is not on merits but merely on technical ground that the same was not made by the respondent within the stipulated period. After the repeal of the Arbitration Act, 1940, the above said ground, as already explained, is no longer available to the petitioner. In my opinion, with the appointment of an Arbitrator by the Commissioner, Municipal Corporation of Delhi vide Notification dated the 11th July, 1997 (Annexure R-1) in terms of the arbitration clause, the above mentioned petition, filed by the petitioner, virtually has become infructuous and deserves to be dismissed. Accordingly, the same is dismissed with no orders as to costs.
The interim order dated the 7th November, 1997 also stands vacated.
Petition stands disposed of in above terms.