Delhi High Court
Sh. Vikas Aggarwal vs Punj Lloyd Limited & Anr. on 18 March, 2009
Author: Anil Kumar
Bench: Anil Kumar
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Arb. P. No. 406/2007
% Date of Decision: 18.03.2009
Sh. Vikas Aggarwal .... Petitioner
Through Mr.Ranjit Kumar, Advocate.
Versus
Punj Lloyd Limited & Anr. .... Respondents
Through Mr.Ashish Aggarwal, Advocate.
CORAM:
HON'BLE MR. JUSTICE ANIL KUMAR
1. Whether reporters of Local papers may be YES
allowed to see the judgment?
2. To be referred to the reporter or not? NO
3. Whether the judgment should be reported in NO
the Digest?
ANIL KUMAR, J.
* This is a petition under Section 11 (6) of the Arbitration & Conciliation Act, 1996 for appointment of an Arbitrator in terms of the arbitration agreement between the parties.
The petitioner contended that he is a reputed contractor and the respondents are engaged in the business of infrastructure development, construction and upgradation of roads, business in real estate and other large scale projects.
The petitioner had submitted his offer for works, namely, production and loading of the GSB material in the project „Rehabilitation Upgradation of Km 312.385 to Km 373.545 new Chaingage (Km 316.00 to Km 381.00 Old Chainage) of National AA No.406/2007 Page 1 of 8 Highways 76 to 4 lane configuration in State of Rajasthan (Contract package EX-II (RJ-8)" on 17th January, 2006.
According to the petitioner, the offer of the petitioner was accepted and work order No. PLL/PFLN11/125799 dated March 6, 2006 was awarded. According to the petitioner, he started work immediately after it was awarded in order to complete the same within the stipulated time of 15 months as per the work order. He asserted that his plant was initially situated at Chandwaji, District Jaipur which was shifted to Salavtia Village Khadipur, Tehsil Bizolia, District Bhilwara, Rajasthan on assurance of respondent No. 2 for the execution of the work of Rs. 2,41,30,000/-.
The petitioner contended that though he had supplied materials to the respondent No. 2 and raised bills for Rs.52,94,350/-, the respondent No. 2 has only paid and amount of Rs. 8,65,000/-. The petitioner‟s grievance is that the remaining payment of Rs. 49,29,350/- has been withheld by respondent No. 2 without assigning any reason to the petitioner. The petitioner had raised a bill and sent it to the respondents and insisted for release of the payment in accordance with Clause-14 of the agreement. However, respondent No. 2 has suspended the supply to the petitioner. The petitioner‟s staff, man, labour and equipment are lying at site without work and the petitioner is suffering huge loss.
The petitioner, therefore, invoked Clause-25 (settlement of disputes) of the agreement dated 6th March, 2006. The Clause-25 of the AA No.406/2007 Page 2 of 8 agreement is as under:-
"25.0 Settlement of Disputes 25.1 For purpose of this clause, PLL and the Sub- contractor shall be individually referred to as "the Party" and collectively, "the Parties".
25.2 In case of disputes/differences, all efforts shall be made to settle them amicable by and between the Pa4ties. Any outstanding disputes/differences shall be firstly referred to a sole Conciliator appointed by the Joint Managing Director of PLL. In case conciliation fails, the disputes/differences shall be referred to Arbitration.
25.3. It is pre-condition that the Party raising the dispute/difference shall give reasonable notice to the other Party explaining the reasons of dispute/difference and the amount of claim on the other Party. It is a condition of this Work Order that conciliation shall not be resorted to unless all efforts to settle disputes/differences amicably my mutual cooperation have been exhausted. Arbitration shall be the last resort in which case the Arbitrator shall enter the reference and neither Party shall have any advantage from the conciliation previously held. The views expressed, or the suggestions made or the admissions made by either Party in the course of conciliation proceedings shall not be introduced as evidence in any arbitration proceedings.
25.4 There shall b no objection if the sole Conciliator or the Arbitrator appointed for dispute resolution is an employee of Punj Lloyd Limited provided the person appointed shall not be directly connected with the works covered in this Work Order.
25.5. The venue of arbitration shall be New Delhi. 25.6 The Works to be executed under this Work Order shall nevertheless continue uninterrupted during the dispute resolution period.
25.7 Subject to aforestated conditions, the provisions of Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the AA No.406/2007 Page 3 of 8 rules made thereunder and for the time being in force shall apply to the conciliation or arbitration proceedings under this clause."
Clause-25 for settlement of disputes also contemplates adjudication of the disputes by Arbitrator to be appointed under the said agreement in accordance with the provisions of Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made there under.
The petitioner had sent a notice dated 16th May, 2007 which was replied through letter dated 15th June, 2007. The petitioner replied to the reply dated 15th June, 2007 by counter-reply dated 4th August, 2007 and sought appointment of an Arbitrator for adjudication of disputes between the parties.
After the respondents failed to appoint an Arbitrator, the present petition was filed on 12th September, 2007 which also stipulates the disputes raised on behalf of the petitioner.
The petition is opposed by the respondents who have filed a reply dated 16th March, 2009 contending inter alia that the petition is pre- mature and against the terms and conditions of the work order dated 6th March, 2005. It is contended that the arbitration is the last resort in terms of Clause-25 of the agreement between the parties. It is contended that in case of disputes, the same had to be settled amicably and on failure to settle the same amicably, a Conciliator had to be appointed and only after failure of the Conciliator, the resolution of disputes by arbitration was to be resorted to.
AA No.406/2007 Page 4 of 8
The respondents contended that the notice dated 18th May, 2007 was given without making effort to settle the disputes amicably nor was Managing Director of the respondents asked to appoint a Conciliator. The respondents also contended that by reply dated 15th June, 2007, the respondents had called upon the petitioner to contact the authorized persons of the respondents along with all documents in support of his claims in order to clarify all or any doubt about his claim. The petitioner did not approach the respondents and rather sent a false and frivolous rejoinder. In the circumstances, it is contended that there was no occasion for the Managing Director of the respondents to appoint an Arbitrator.
After the petition was filed by order dated 28th January, 2008, the parties were directed to meet for a amicable settlement in the office of respondent No. 1. Despite the order passed by this Court, the disputes has been settled amicably nor the dispute could be resolved by the respondents through a Conciliator.
Even after failure of resolution of the disputes amicably, the Arbitrator has not been appointed by the respondents. The reply to the petition dated 16th March, 2009 has been filed, however, till that time, the Arbitrator has not been appointed.
In the facts and circumstances the arbitration agreement between the parties is admitted. It is also not denied that despite invoking the arbitration agreement, the respondents have not appointed any arbitrator till today. Since the respondents have failed to appoint the AA No.406/2007 Page 5 of 8 arbitrator in terms of clause 25 of the agreement which is an arbitration clause, the respondents have lost their right to appoint an arbitrator.
In Union of India v. M/s. R.R. Industries, 120 (2005) DLT 572 (DB) it was held that once a party does not supply the vacancy or fails to supply the vacancy before filing of a petition under Section 11(6) of the Arbitration and Conciliation Act, such a party forfeits the right to supply the vacancy in terms of the arbitration clause and what remains is only the arbitration clause, i.e. the dispute has to be resolved under the mechanism of alternative dispute redressal scheme but no right survives to the respondent to supply the named Arbitrator in the arbitration clause. In the present facts and circumstances there is no named arbitrator.
A three-Judge Bench of this Court in Punj Lloyd Ltd. v. Petronet MHB Ltd., III (2006) SLT 287=II (2006) CLT 251 (SC)=(2006) 2 SCC 638, considered the applicability of Section 11(6) and held that once notice period of 30 days had lapsed, and the party had moved the Chief Justice under Section 11(6), the other party having right to appoint Arbitrator under arbitral agreement loses the right to do so. While taking this view, the Court had referred to the judgment rendered in Datar Switchgears Ltd. v. Tata Finance Ltd. and Another, VII (2000) SLT 543=IV (2000) CLT 191 (SC)=(2000) 8 SCC 151, wherein at page 158 (para 19) SCC, it was held as under :
"19. So far as cases falling under Section 11(6) are concerned--such as the one before us -- no time limit has been prescribed under the Act, whereas a period of 30 days AA No.406/2007 Page 6 of 8 has been prescribed under Section 11(4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an Arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the Court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an Arbitrator. Only then the right of the opposite party ceases. We do not, therefore, agree with the observation in the above judgments that if the appointment is not made within 30 days of demand, the right to appoint an Arbitrator under Section 11(6) is forfeited."
In the circumstances, it will be just and appropriate to appoint an arbitrator to adjudicate the disputes which are raised and which may be raised by the parties. Considering the totality of the facts and circumstances, therefore, it will not be appropriate to infer that there was no occasion for the respondent No.1‟s Managing Director to appoint an Arbitrator. Consequently, it has to be inferred that the respondents have lost their right to appoint an Arbitrator in terms of Clause-25 of the agreement.
Therefore, in the facts and circumstances, it will be just and appropriate for this Court to appoint an Arbitrator. Consequently, Sh. S.M. Chopra, Advocate (retired Additional District Judge), 181, Deshbandhu Apartments, Kalkaji, New Delhi-110019 (Mobile:
9213230349; Residence: 26484158) is appointed as an Arbitrator to AA No.406/2007 Page 7 of 8 adjudicate all the disputes between the parties. The Arbitrator shall be entitled to devise his procedure for conducting the arbitration proceedings. The fees of the Arbitrator shall be Rs. 10,000/- per hearing, subject to a maximum fees of Rs. 2,00,000/-. The Arbitrator shall also be entitled to secretarial expenses. The parties are directed to appear before the Arbitrator on 27th March, 2009 at 4.00 p.m. A copy of this order be sent to the Arbitrator forthwith and copies of this order be also given dasti to learned counsel for the parties.
With these directions, the petition is disposed of.
MARCH 18, 2009 ANIL KUMAR, J.
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AA No.406/2007 Page 8 of 8