Allahabad High Court
In The Matter Of: Dakshinanchal Vidyut ... vs Reliance Infrastructure Limited on 12 March, 2018
Author: Ashwani Kumar Mishra
Bench: Ashwani Kumar Mishra
HIGH COURT OF JUDICATURE AT ALLAHABAD Interlocutory AFR Court No. - 16 Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 145 of 2017 Applicant :- In The Matter Of: Dakshinanchal Vidyut Vitran Nigam L. Opposite Party :- Reliance Infrastructure Limited Counsel for Applicant :- Baleshwar Chaturvedi,Baleshwar Chaturvedi,Mata Prasad Counsel for Opposite Party :- Shobhit Chauhan Hon'ble Ashwani Kumar Mishra,J.
1. Dakshinanchal Vidyut Vitran Nigam Limited (hereinafter referred to as 'applicant') is a Government Company, owned and controlled by the State of U.P., which is engaged in distribution of electricity in southern part of the State. It invited bids for execution of rural electrification work in different districts under the Rajiv Gandhi Gramin Vidyutikaran Yojna 10th Plan. Three separate bids were floated vide Document Nos.50 of 2005, 51 of 2005 and 52 of 2005 for cluster of different districts. The bid document contained Form-A including general conditions of contract for supply of plant and execution. Clause 38 thereof provided for settlement of dispute, difference or controversy by way of arbitration. It reads as under:-
"38. If any dispute, difference or controversy shall at any time arise between the Contractor on the one hand and the D.V.V.N.L. and the Engineering of the Contract on the other hand Contract, or as the true construction, meaning and intent of any part or condition of the same or as to manner of execution or as to the quality or description of or the payment for the same, or as to the true intent, meaning, interpretation construction or effect of the clause of the contract specification or drawing or any of them or as to anything to be, done committed or suffered in pursuance of the contract or specification, or as in the mode of carrying the contract into effect or as to the breach or alleged breach or as to obviating or compensation for the commission any of such breach or as to any other matter or thing whatsoever connected with or arising out of the contract, and whether before or during the progress or after the completion of the contract such question, difference or dispute shall be referred for adjudication to the M.D., D.V.V.N.L. or any other person nominated by him on this behalf and his decision on writing shall be final binding and conclusive. This submission shall be deemed to be a submission to arbitration modification thereof. The arbitrator may from time to time with consent of the parties, enlarge the time for making and publishing the award."
2. Bids submitted by M/s Reliance Infrastructure Limited (formerly known as Reliance Energy Limited) were ultimately accepted. Notification of award thereafter was issued on 13th August, 2005, which also contained a clause relating to settlement of dispute. Clause 20 of notification of award reads as under:-
"20.0 SETTLEMENT OF DISPUTES AND ARBITRATION 20.1 All the differences or disputes arising out of this Contract shall be settled through the process of "Settlement of Disputed" and "Arbitration" as per Clause 38A of Form 'A', Conditions of contract, Vol.-I of the Bidding Documents. The provisions of Arbitration and Reconciliation Act, 1996 as amended from time to time, shall apply.
20.2 The local Court of Agra, High Court of Allahabad and Supreme Court of Delhi alone shall have the exclusive jurisdiction in all matters arising out of this Contract."
3. It appears that dispute arose between the parties relating to performance of obligations under the contract. The respondent company i.e. the contractor issued notice on 31.1.2017, invoking arbitration under Clause 38 of the general terms and conditions of the contract. It alleged that various amounts are due and payable to it, and consequently, a claim for a sum of Rs.82.38 crores (principal Rs.32.39 crores + interest amounting to Rs.49.99 crores) was raised. Clauses 8 and 9 of this letter is relevant and is, therefore, reproduced hereinafter:-
"8. As stated hereinabove, no decision whatsoever has been notified to R-Infra, as such in accordance with the provisions of Arbitration and Conciliation Act, 1996 (as amended, we hereby nominate and or appoint Sri R.D. Gupta (Former Director-Commercial, NTPC, Former Member-UP Electricity Regulatory Commission) as Arbitrator having his address at GA-21, Anandam NTPC Society, Pocket-P6, Greater Noida UP-201 310.
9. REQUEST You are requested to nominate/appoint a Arbitrator on your behalf within a period of thirty (30) days from the date of receipt thereof so as to enable both the Learned Arbitrators to appoint the Learned Presiding Umpire in accordance with The Arbitration and Conciliation (Amendment) Act, 2015."
4. Letter of 31st January, 2017 was replied by Chief Engineer of applicant company on 3rd March, 2017. Contents of the letter dated 3.3.2017 reads as under:-
"Sir, In reference to above mentioned letters, we hereby name the following as the Arbitrator as required by the terms of Agreement:-
Shri Jagdeep Singh Vohra (Advocate) Chamber No.171, western wing, Tis Hazari Court, New Delhi You are requested to ensure expedient necessary action as per the terms of agreement."
5. Respondent has brought on record a letter sent by Sri Jagdeep Singh Vohra addressed to the respondent dated 4.8.2017, intimating that Sri Rajat Srivastava, Advocate, has been jointly appointed as presiding arbitrator by two arbitrators i.e. Sri Jagdeep Singh Vohra and Sri R.D. Gupta, and 16th August, 2017 is the date fixed in the chambers of Sri Vohra in Western Wing, Tis Hazari Courts, Delhi. On 16th and 24th August, 2017 the applicant did not appear and the matter was adjourned to 31st August, 2017. On next two dates i.e. 31.8.2017 and 21.9.2017, proceedings were adjourned upon the request of learned Advocate representing the applicant company. On 10th November, 2017, the applicant company prayed that the learned arbitrators make mandatory disclosure as per the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act of 1996'), and also decide on the question of non-compliance under Section 11 of the Act of 1996, and to decide reasonable fee. The matter accordingly was adjourned to 20th November, 2017. On this date, the Advocate representing applicant moved an application enclosing therewith a letter of Managing Director withdrawing Sri Jagdeep Singh Vohra as nominee of Managing Director and removed him as arbitrator. It was also stated that Arbitral Tribunal has been constituted in contravention of Arbitration Clause 38, which was duly accepted and signed by both the parties. It stated that constitution of Arbitral Tribunal is nullity in the eyes of law. The letter of Managing Director addressed to the two arbitrators and the presiding arbitrator, dated 20.11.2017, is extracted in its entirety hereinafter:-
"Sub:- Illegal Constitution of Arbitral Tribunal, pertaining to the so called claim of Reliance Infra. Ltd., which is void ab initio and nullity in law.
Dear Sir, The then Managing Director of Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL) appointed Mr. Jagdeep Singh Vohra to act as sole Arbitrator as per clause 38 of General Conditions-Form A, which was agreed in writing both by the DVVNL as well as Reliance Infra Limited (RIL). However, Mr. Jagdeep Singh Vohra acted in sheer neglect & in contravention of mandatory provisions of said clause 38 by himself constituting the Arbitral Tribunal consisting of Mr. R.D. Gupta & Mr. Rajat Srivastav (as umpire). This is most arbitrary & the constitution of said so called Arbitral Tribunal is nullity in law.
Therefore, I, Sudhir Kumar Verma, the Managing Director of Dakshinanchal Vidyut Vitran Nigam Ltd. withdraw Mr. Jagdeep Singh Vohra as my nominee & remove as Arbitrator. The so called constitution of Arbitral Tribunal is in contravention of said Clause 38 (i.e. Arbitration Clause) & the same is illegal & nullity in law.
In view of above, the Dakshinanchal Vidyut Vitran Nigam Limited refuse to appear before the illegally constituted said Arbitral Tribunal.
With Regards, Your's Sincerely (S.K. Verma) Managing Director"
6. It is thereafter that the applicant has filed the present application invoking jurisdiction of this Court under Section 11(5) &(6) of the Arbitration and Conciliation Act, 1996 with the allegation that parties have failed to agree on the appointment of arbitrator, and that this Court may appoint an arbitrator in view of the amendment incorporated vide Act 3 of 2016.
7. A counter affidavit has been filed stating that the applicant having appointed its arbitrator in terms of the request made by the contractor on 31.1.2017 cannot be permitted to withdraw from the proceedings and move this Court under Section 11 of the Act. It is stated that Sri Jagdeep Singh Vohra was not the sole arbitrator and was merely an arbitrator appointed by the applicant, in response to the notice of respondent company, as per which it had already appointed its arbitrator Mr. R.D. Gupta. Submission is that once the two arbitrators have appointed a presiding arbitrator/umpire, the issue of legality of constitution of Arbitral Tribunal can only be raised before the Tribunal itself, and not in any other manner. Reliance is placed upon a judgment of the Apex Court in Antrix Corporation Ltd. Vs. Devas Multimedia Private Ltd., reported in (2014) 11 SCC 560. Reliance is also placed upon para 54 of the judgment of the Apex Court in TRF Ltd. Vs. Energo Engineering Projects Ltd., reported in (2017) 8 SCC 377. It is also stated that the applicant through its counsel has already appeared before the Arbitral Tribunal and having submitted to its jurisdiction voluntarily, cannot be permitted to unilaterally resile from it, and seek appointment of arbitrator under Section 11.
8. A rejoinder affidavit has also been filed by the applicant denying the averments made in the counter affidavit, and reiterating the stand of the applicant in the original petition.
9. I have heard Sri Rakesh U. Upadhyay and Sri Baleshwar Chaturvedi for the applicant and Sri Anurag Khanna, learned Senior Counsel assisted by Sri Shobhit Chauhan and Sri Hasan Murtaza for the respondents.
10. Original records of the applicant company have also been produced, from a perusal whereof it transpires that the letter of applicant company dated 3rd March, 2017 was issued with the approval of the Managing Director. Sri Upadhyay appearing for the applicant submits that the parties have agreed for reference of dispute to arbitration in terms of Clause 38 of the agreement, which clearly provides the Managing Director of applicant company to be the named arbitrator or any other person nominated by him. It is contended that the agreement between the parties with regard to appointment of arbitrator has not been substituted with any other agreement, and the letter of respondent dated 31.1.2017 is not in conformity with the terms of arbitration agreement. It is submitted that the Arbitral Tribunal constituted with the consent of Sri Jagdeep Singh Vohra has never been agreed upon by the applicant, nor such an agreement could be inferred, in view of clear and express contrary intendment under Clause 38. Learned counsel states that unless the parties agree upon a different procedure for appointment of arbitrator, they cannot resile from the express terms of the arbitral clause. Submission is that the constitution of Arbitral Tribunal is nullity in law, and therefore, this Court may proceed to appoint an arbitrator in the matter. Reliance is placed upon a decision of Hon'ble Supreme Court in Walter Bau AG, Legal Successor, of the Original Contractor, Dyckerhoff and Widmann A.G. Vs. Municipal Corporation of Greater Mumbai and another, reported in (2015) 3 SCC 800.
11. Sri Anurag Khanna, learned Senior Counsel, on the contrary disputes the aforesaid contention and submits that the parties have agreed upon a new procedure for constitution of Arbitral Tribunal in the facts of the present case. Contention is that the named arbitrator was ineligible in terms of amended provisions of the Act, and therefore, the respondent proposed a different scheme, which was acted upon by the applicant, and the same cannot be questioned now. It is also submitted that any objection relating to constitution of Arbitral Tribunal, at this stage, can at best be raised before the Tribunal in terms of Section 13, and issues in that regard cannot be adjudicated by this Court in present proceedings. It is also submitted that the applicant has otherwise submitted to the jurisdiction of Arbitral Tribunal and objections were raised with regard to determination of fee etc. and it would be impermissible to question the constitution of tribunal subsequently.
12. On the basis of rival submissions advanced, following questions arise for consideration in the present case:-
(i). Whether the procedure for appointment of arbitrator in terms of Clause 38 was substituted by a fresh agreement for constitution of arbitral tribunal?
(ii). Whether this Court in exercise of jurisdiction under Section 11 can determine legality of arbitral tribunal constituted in the matter?
13. Clause 38 of the general conditions of contract as well as Clause 20 of the notification of award of contract have already been extracted above. Under the agreed procedure, the Managing Director of applicant company or a person nominated by him is to act as sole arbitrator. There is no contemplation in the agreement for constitution of an Arbitral Tribunal consisting of an arbitrator each to be appointed by the parties, and the arbitrators in turn agreeing for appointment of a presiding arbitrator/umpire.
14. Before proceeding further, it would be appropriate to take note of amendment made in the Act of 1996, by Act 3 of 2016. Sub-section (5) is added to Section 12 of the Act, which reads as under:-
"12(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing."
Unless the parties specifically waive the applicability of Sub-section (5), by an express agreement in writing, a person covered in the Seventh Schedule shall be ineligible to be an arbitrator. There is otherwise no written consent by the parties to waive applicability of Sub-section (5), and therefore, the bar of Sub-Section (5) would clearly be attracted in the facts of the present case. The Managing Director was, therefore, ineligible to act as arbitrator.
15. Appointment of arbitrator, in such factual scenario, would be regulated as per Section 11 of the Act of 1996. Sub-sections (2), (5) and (6) of Section 11 are relevant for the present purposes, and are consequently reproduced:-
"11. Appointment of arbitrators.--
(1) .....
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. (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 appointment procedure agreed upon by the parties i.e. Clause 38 was clearly not available in view of the express statutory interdict contained in Section 12(5) of the Act. In such circumstances, the parties were free to agree on a procedure for appointing the arbitrator or arbitrators, or to approach this Court under Section 11 of the Act. According to the respondents, parties to the contract have in fact agreed on a procedure distinct from Clause 38. According to Sri Khanna, an arbitration agreement in terms of Section 7 of the Act would come into being even by exchange of letters etc. Learned Senior Counsel has relied upon Section 7(4)(b) of the Act, in order to contend that the correspondence between the parties clearly indicates that a substituted procedure has been agreed upon for constitution of Arbitral Tribunal. Section 7(4)(b) of the Act provides as under:-
"7.(4) An arbitration agreement is in writing if it is contained in--
(a) ........
(b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or"
17. An arbitration agreement is defined under Section 7(1) of the Act of 1996 to mean an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. Sub-section (3) of Section 7 provides that arbitration agreement shall be in writing. Sub-section (4)(b) provides that arbitration agreement is in writing, if it is contained in exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement. The statutory scheme, therefore, makes it permissible for the parties to agree on a procedure for appointing the arbitrator even by exchange of letters etc. What has to be seen is as to whether such an agreement has in fact been made or not?
18. Respondents rely upon three letters for the purpose i.e. the respondent's notice dated 31.1.2017, the reply of applicant dated 3rd March, 2017 and the letter dated 20.11.2017 of the applicant. The first communication by the respondent is in the form of notice invoking Arbitration Clause 38. The notice is contained in Annexure-4 and the subject of notice is invocation of arbitration under Clause 38 of the general terms and conditions of the contract. The first para of the notice clearly specifies it and is extracted hereinafter:-
"1. This letter is being issued to you in terms of the Contract Agreements referred hereinabove, read with Clause 38 of the General Terms & Conditions Of Contract ("GCC") for the Works of Rural Electrification in respect of above referred 8 Districts of Uttar Pradesh. The said clause provides that the submissions shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act, 1940 or any statutory modification thereof."
19. In Clause 7, the issues, which have not yet been resolved, are specified and claim is quantified. A total sum of Rs. 82.38 crores is alleged to be due and payable by the applicant to the respondent. Clauses 8 and 9 of this notice are the only other averments relevant for our purposes, and have already been extracted above. Clause 8 states that as no decision has been notified to the respondent in respect of the claim raised, as such in accordance with the provisions of Act of 1996, as amended, the respondent company nominates and appoints Sri R.D. Gupta as arbitrator. In Clause 9, a request is made to the applicant to nominate/appoint an arbitrator on its behalf, so as to enable the learned arbitrators to appoint a presiding umpire in accordance with amending Act.
20. The notice dated 31.1.2017 is the first notice invoking Arbitration Clause 38. This notice nowhere solicits consent of the applicant to agree upon a new procedure for appointment of arbitrator, other than what is contemplated under Clause 38. As a matter of fact, Clause 38 itself is invoked by the respondent. The assertion made in the notice to nominate and appoint Sri R.D. Gupta as arbitrator by the respondent is clearly inconsistent with the agreed procedure between the parties. Clause 38 does not contemplate appointment of an arbitrator by the respondent. The request conveyed in Clause 9 to appoint an arbitrator by the applicant with a view to select a presiding umpire was again inconsistent with Clause 38.
21. The notice dated 31.1.2017 in fact proceeds upon an assumption that parties have agreed upon a new procedure for appointment of arbitrator, other than what is contemplated under Clause 38. This assumption is not shown to have any basis. There is nothing under the scheme of amended Act to provide for a different appointment procedure, nor an Arbitral Tribunal consisting of three arbitrators would ipso facto be formed, once the named arbitrator is ineligible to act by virtue of Section 12(5).
22. On the contrary, the applicant's reply to notice dated 31.1.2017 specifies that Sri Jagdeep Singh Vohra, Advocate, would be the arbitrator in terms of agreement. A request is also made to ensure expedient necessary action as per the terms of agreement. The only agreement on record by then, was the one contained in Clause 38, as per which the Managing Director or his nominee was to be the sole arbitrator. The reply of 3rd March, 2017 cannot be construed as an agreement in terms of Section 7(4) of the Act, substituting Clause 38 by a different appointment procedure. The argument of the respondent that the applicant agreed for constitution of an Arbitral Tribunal, on the basis of exchange of letters is thus not made out. There is no conscious decision of parties to substitute the appointment procedure contained in Clause 38, by any other procedure for appointment of arbitrator, nor can it be so by default.
23. Even if the notice invoking Arbitration Clause 38 is construed as proposing a substituted appointment procedure, it would at best be an offer, which has not been accepted, rather, the applicant reiterated Clause 38 for the conduct of arbitration. Appointment of Sri Vohra in terms of Clause 38 would be as sole arbitrator and not as one of the arbitrator in an Arbitral Tribunal consisting of two respective arbitrators for the parties with a presiding arbitrator/umpire. The plea taken by the respondent that an Arbitral Tribunal consisting of three arbitrators is agreed upon is clearly not shown to exist, and such a procedure, therefore, would not bind the applicant. The plea that applicant has submitted to the jurisdiction of Arbitral Tribunal is also not made out. What is stated by the applicant before this Court is that the applicant was completely kept in dark about appointment of presiding arbitrator by the two arbitrators, and that it had never agreed for such an exigency. On facts also, it appears that the proceedings were adjourned on couple of occasions and disclosure in terms of Section 11 was called for by the counsel appearing for the applicant. It appears that as soon as the applicant realized that a procedure inconsistent with what was agreed upon under Clause 38 was being pursued, it immediately retraced its steps by recalling the appointment of Sri Vohra. It was clarified that Sri Vohra was to act as a sole arbitrator, by virtue of Clause 38, and Clause 38 did not admit of an Arbitral Tribunal consisting of three arbitrators. The constitution of Arbitral Tribunal thus has been objected to by the applicant, at the threshold. The plea that applicant submitted to the jurisdiction of Tribunal, therefore, is also not sustainable.
24. In view of the discussions aforesaid, I am inclined to hold that the only appointment procedure agreed upon by the parties was the one contained in Clause 38 of the agreement, and the parties had not agreed upon a different appointment procedure, even by exchange of letters. No arbitration agreement constituting an Arbitral Tribunal, consisting of three arbitrators ever came into being. Such a constitution was otherwise not contemplated by operation of law, once the named arbitrator became ineligible. The first issue is, therefore, answered by holding that the parties have not agreed for a different appointment procedure, substituting Clause 38 of the agreement.
25. The second issue need be examined now. This Court under Section 11 of the Act is vested with jurisdiction to appoint an arbitrator. Various sub-sections of Section 11 defines the limits of exercise of such jurisdiction. Sub-section 2 of Section 11 provides that subject to Sub-section (6), the parties shall be free to agree on a procedure for appointing the arbitrator. In case the parties fail to agree on a procedure for appointing the arbitrator or arbitrators, within 30 days from the receipt of a request by one party, the jurisdiction of this Court under Sub-section (5) of Section 11 can be invoked to appoint an arbitrator. In the other event where the parties have failed to act as required under the appointment procedure agreed upon by them, or the two appointed arbitrators or the institution fail to perform such function, then also jurisdiction of this Court could be invoked under Sub-section (6). In the event an application is filed under Sub-section (5) or (6) of Section 11, the Chief Justice or the designated Court would necessarily be required to determine the question as to whether an agreement in terms of Sub-section (2) has been agreed upon by the parties, for appointing the arbitrator or the parties have failed to act as per agreed procedure for appointing the arbitrator. This is so as only when the parties have failed to agree on an appointment procedure that the jurisdiction under Sub-section (5) could be invoked. Similarly the failure of parties to act as per agreed procedure vests jurisdiction under Sub-section (6) of Section 11. This Court, therefore, is enjoined by law to determine such issues before proceeding to exercise its jurisdiction under Sub-section (5) or (6) to Section 11 of the Act of 1996.
26. Learned counsel for the respondent has heavily relied upon observation of the Apex Court in Para 31 in Antrix Corporation Ltd. (supra), which is reproduced hereinafter:-
"31. The matter is not as complex as it seems and in our view, once the Arbitration Agreement had been invoked by Devas and a nominee Arbitrator had also been appointed by it, the Arbitration Agreement could not have been invoked for a second time by the Petitioner, which was fully aware of the appointment made by the Respondent. It would lead to an anomalous state of affairs if the appointment of an Arbitrator once made, could be questioned in a subsequent proceeding initiated by the other party also for the appointment of an Arbitrator. In our view, while the Petitioner was certainly entitled to challenge the appointment of the Arbitrator at the instance of Devas, it could not do so by way of an independent proceeding under Section 11(6) of the 1996 Act. While power has been vested in the Chief Justice to appoint an Arbitrator under Section 11(6) of the 1996 Act, such appointment can be questioned under Section 13 thereof. In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one Arbitrator already appointed in exercise of the Arbitration Agreement."
27. The issue has been examined in a subsequent decision of the Apex Court in Walter Bau A.G. (supra) and the judgment in Antrix Corporation Ltd. (supra) has been explained. Paras 9 and 10 of the judgment in Walter Bau A.G. (supra) are relevant and are reproduced hereinafter:-
"9. While it is correct that in Antrix (supra) and Pricol Limited (supra), it was opined by this Court that after appointment of an Arbitrator is made, the remedy of the aggrieved party is not under Section 11(6) but such remedy lies elsewhere and under different provisions of the Arbitration Act (Sections 12 and 13), the context in which the aforesaid view was expressed cannot be lost sight of. In Antrix (supra), appointment of the Arbitrator, as per ICC Rules, was as per the alternative procedure agreed upon, whereas in Pricol Limited (supra), the party which had filed the application under Section 11(6) of the Arbitration Act had already submitted to the jurisdiction of the Arbitrator. In the present case, the situation is otherwise.
10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law. In the present case, the agreed upon procedure between the parties contemplated the appointment of the arbitrator by second party within 30 days of receipt of a notice from the first party. While the decision in Datar Switchgears Ltd. (supra) may have introduced some flexibility in the time frame agreed upon by the parties by extending it till a point of time anterior to the filing of the application under Section 11(6) of the Arbitration Act, it cannot be lost sight of that in the present case the appointment of Shri Justice A.D. Mane is clearly contrary to the provisions of the Rules governing the appointment of Arbitrators by ICADR, which the parties had agreed to abide in the matter of such appointment. The option given to the respondent Corporation to go beyond the panel submitted by the ICADR and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non- est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd. (supra), is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by the ICADR. The said appointment, therefore, is clearly invalid in law."
(emphasis supplied)
28. In the facts of the present case, the agreed procedure for appointment of arbitrator in terms of Section 11 (6) has clearly not been followed. No other appointment procedure has otherwise been agreed upon in arbitration agreement. In such circumstances, the observation made in paras 9 and 10 in Walter Bau A.G. (supra) would clearly be attracted in the facts of the present case. The jurisdiction of this Court under Sub-section (6) of Section 11 would clearly be available, once it is found that the agreed procedure has not been followed and there was no other agreement between the parties, laying down a different appointment procedure. The appointment procedure followed in the facts of the present case being inconsistent with the appointment procedure agreed upon by the parties has to be ignored and treat as non-est in law. The jurisdiction of this Court under Section 11 (6) is, therefore, required to be invoked.
29. Para 54 of the judgment in TRF Limited (supra), relied upon by the counsels, would also be relevant in the facts of the present case and is, therefore, reproduced:-
"54. In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so."
30. The Managing Director in terms of Clause 38 since is ineligible, it would be impermissible in law for him to act as arbitrator or to nominate any arbitrator, considering the object for which the Act of 1996 has been amended vide Act 3 of 2016. Necessary ingredients to attract jurisdiction of this Court under Sub-section (6) of Section 11, therefore, exists and an arbitrator has to be appointed.
31. Let Mr. Justice V. K. Shukla, a retired Judge of this Court, R/o House No.37, High Court Judge's Colony, Sector 105, Noida, Gautam Buddh Nagar, Mobile No.9415217804, be appointed as an Arbitrator to resolve the dispute, subject to his consent, in terms of Section 11(8) of the Act of 1996.
32. The Registry is directed to obtain consent of the proposed Arbitrator, in terms of amended provisions contained under sub-section (8) of Section 11 of the Act of, 1996, within a period of three weeks from today.
33. List thereafter.
Order Date :- 12.3.2018 Anil