Andhra HC (Pre-Telangana)
Galada Power And Telecommunication ... vs Transmission Corporation Of A.P. Ltd. ... on 1 August, 2001
Author: S.B. Sinha
Bench: S.B. Sinha
JUDGMENT S.B. Sinha, C.J.
1. This is an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator on behalf of the respondents.
2. The facts leading to the filing of the application are as follows:
Petitioner is one of the manufacturers of "All Aluminum Alloy Conductors" (AAAC) predominantly used by State Electricity Boards. The 1st respondent - AP Transco floated a global tender involving "International Competitive Bidding" under World Bank Loan assistance for the purchase of AAAC for A.P. Power Sector Restructuring Project. Petitioner participated in the bid and it was awarded contract with the concurrence of the World Bank. Respondent No. 2 placed a purchase order vide No. CEE/E1/WB/APL1/Rs-2/RS-2/PM-9616/99 dated 4.3.1999 with the petitioner for the supply of AAAC valuing US $ 9.1 million with payment terms being through letter of credit in US dollars and accordingly it had entered into an agreement with the petitioner vide Contract Agreement No. CE-APL/APL1/DIST-RS/2/1/99 dated 4.3.99 for the aforesaid amount. After execution of part of the contract, the petitioner had stopped supplies as disputes arose between the parties with regard to payment for the supplies made viz. non-opening of letters of credit, payment in Indian Rupees instead of in US dollars, inordinate delay in making payments for the supplies made ranging from 30 to 240 days etc. Ultimately, the respondents unilaterally terminated the contract for the balance supplies vide their Letter No. CEE/P-D/APLI/EI/AEEI/PM-9616/D. No. 245/01 dated 19.2.2001.
3. In terms of Clause 10 of the Purchase Order, the petitioner invoked the arbitration clause and appointed Sri K. Gopalakrishna Murthy, Advocate as its arbitrator and a legal notice was issued requesting the respondents to appoint an arbitrator from their side within 30 days from the date of receipt of the notice. It appears that the respondents replied that the arbitration clause couldn't be invoked since W.P. No. 3044 of 2001 filed by the petitioner was pending. According to the petitioner, the said writ petition was filed only in regard invocation of the bank guarantee and it has nothing to do with the arbitration proceedings. This Court has jurisdiction in terms of Clause 10 of the Purchase Order read with the agreement dt.4.3.99 ie Clause No. 28 of General Conditions of the Contract (GCC) and Clause 15 of Special Conditions of Contract (SCC).
4. The respondents filed a counter-affidavit, inter alia, disputing the claim of the petitioner. The company accepted all the payments made in Indian Rupees by cheques and no protest was made for making L/C payments. The petitioner made no supplies from January 2000 and it has been insisting for establishment of Letter of Credit in advance for the entire balance quantity of Conductors for restoration of supplies. There is no provision in the contract for opening L/C in advance for the entire balance quantity. The petitioner has not made any negotiations for resolution of the disputes in accordance with condition 28.1 of GCC. Bypassing all the procedure, the petitioner has filed the present application.
5. The respondents contend that this Court, while exercising its power under section 11(6) of the Arbitration Act, has to see whether the party seeking for appointment of an arbitrator has acted in accordance with the procedure agreed upon by the parties. It further appears that there exists a dispute as regards the question as to whether one or the other arbitration clauses contained in the General Conditions of Contract, Special Conditions of Contract or the Purchase Order shall be applicable. It was also contended that the dispute in relation to invocation of bank guarantee and termination of contract having been raised after the purported appointment of the arbitrator by the applicant on 27.2.2001, which was received by the respondent on 3.3.2001, this application is not maintainable.
6. According to the respondents, the requirements of conditions 28.1 and 28.2 of General Conditions of contract have not been fulfilled. In any vent, contends the respondents, an opportunity should be given to the respondents to appoints its arbitrator.
7. The respondents further contend that arbitration Clause is contained in Clause 28 of GCC. The arbitration clause 10 provided in Letter of Purchase Order cannot be taken into account because it was not part of the contract dated 4.3.1999 between the parties and it is not one of the documents listed in Clause 2 of the contract which were made part of the contract. The present application having been filed under Clause 10 of the Purchase Order, therefore, is not maintainable.
8. Clause 10 of the Purchase Order referred to in the application provides for "Resolution of Disputes" through arbitration, which reads as follows:
(a) In the case of a dispute or difference arising between the purchaser and a domestic supplier relating to any matter arising out of or connected with this Agreement, such disputes or differences shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The Arbitral Tribunal shall consist of 3 Arbitrators, one each to be appointed by the purchaser and the supplier. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the parties and shall act as Presiding Arbitrator. In case of failure of the two arbitrators appointed by the parties reach upon a consensus within a period of 30 days from the appointment of the Arbitrator appointed subsequently, the presiding Arbitrator will be appointed by the President of Institution of Engineers (India).
(b) If one of the parties fails to appoint its Arbitrator within 30 days after receipt of the notice of the appointment of its Arbitrator by the other party, then the Presiding Arbitrator shall be nominated by President of the Institution of Engineers (India). A certified copy of the order of the President of the Institution of Engineers (India), making such an appointment shall be furnished to each of the parties.
(c) Arbitration proceedings shall be held at Hyderabad, Andhra Pradesh, India and the language of the Arbitration Proceedings and that of all documents and communication between the parties shall be English.
(d) The decision of the majority of Arbitrators shall be final and binding upon both parties. The cost and expenses of arbitration proceedings will be paid as determined by the Arbitral Tribunal. However, the expenses incurred by each party in connection with the preparation, presentation etc. of its proceedings as also the fees and expenses paid to the Arbitrator appointed by such party or on its behalf shall be borne by each party itself.
9. It is not dispute that in terms of the said clause, the petitioner had invoked the said arbitration clause and appointed Sri K. Gopalakrishna Murthy, Advocate as their arbitrator. The respondents, however, instead of appointing its own arbitrator raised objection to the effect that in view of the fact that the petitioner herein had filed a writ petition being W.P. No. 3044 of 2001 questioning the invocation of bank guarantee, no arbitrator need be appointed. It appears that in the counter filed by the respondent in the said writ petition it has been contended that the writ petition has become infructuous in view of the invocation of the arbitration clause. Therefore, the invocation of the arbitration clause is not in dispute. It is also not in dispute that the respondent had failed to appoint its own arbitrator.
10. The other contentions, which have been raised by the respondents herein, in the opinion of the Court, are to be exclusively raised before the arbitral tribunal in terms of section 16 of the Act.
11. The jurisdiction of the Court under 11(6) is limited. Unless there exists a clause as regards the inherent lack of jurisdiction of this Court, an arbitrator has to be appointed and all objections relating to the merit of the dispute as also arbitrability of the claim etc. must be raised only before the arbitral tribunal. Even in a case where an arbitrator is not appointed by the respondent, the party must be held to have abandoned its right and the Chief Justice of the High Court becomes entitled to appoint an arbitrator in terms of Section 11(6) of the Act. The jurisdiction of the Chief Justice or his nominee in terms of Section 11(6) of the Act has recently been considered by a Division Bench of this Court in UNION OF INDIA v VENGAMAMBA ENGINEERING CO., wherein it has been held that when the party has not disputed the arbitration clause, it is bound to oblige to comply with the procedure laid down thereunder. In G. Ramachandra Reddy & Co. v. Chief Engineer, Madras, M.E.S. AIR 1984 SC 2381, the Apex Court clearly held that once an appointing authority abdicates his power, no further chance should be given to it.
12. For the reasons aforementioned, the objection raised by the respondents as regards the exercise of the jurisdiction of this Court under section 11(6) is rejected. Sri Nuty Ramamohan Rao, Advocate is appointed as Arbitrator on behalf of the respondents on usual terms.