Jharkhand High Court
M/S Akarshan Infradevelopers Pvt. Ltd. ... vs Bokaro Steel Officers Housing ... on 16 June, 2022
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Application No. 07 of 2020
M/s Akarshan Infradevelopers Pvt. Ltd. through Mr. Ranjan Kumar
Malviya, s/o Hari Narayan Malviya, aged about 43 yrs, authorized
representative having its registered office at flat no. 6529, c 6 & 7,
Vasant Kunj, P.O. & P.S. Vasant Kunj, Dist. New Delhi-110070.
... ...Petitioner/Applicant
Versus
Bokaro Steel Officers Housing Co-operative Society Ltd.
(BSOHCSL), through its Chairman Mr. A. K. Singh having its
registered office at Vill: Ranipokhar, Sector 9, Bokaro Steel City, P.O.
& P.S. Harla, Dist. Bokaro Jharkhand.
...... Respondent
-------
CORAM: HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
-------
For the Applicant : Mr. Mayank Mohit Sinha, Advocate For the Respondent : Mr. Sumeet Gadodia, Advocate
---------------------------
12/Dated 16th June, 2022
1. The instant application is under Section 11 (6) of the Arbitration and Conciliation Act, 1996 seeking a direction for appointment of Sole Arbitrator in terms of Clause 43 of the construction agreement dated 25.01.2014.
2. The case as per the pleading made on behalf of the petitioner-applicant reads as under:
The petitioner-applicant was awarded the design, construction and development contract for construction of 448 units comprising of 09 towers spread over an area of 7.5 acres for the members of Bokaro Steel Officers Housing Co-operative Society Limited (a registered society), for the officers of Steel Authority of India Limited/Bokaro Steel Plant vide letter dated 27.12.2013. Pursuant to the award of the work, the parties agreed on terms and conditions which was captured in the form of Construction Agreement dated 25.01.2014 and executed between the 2 petitioner and the respondent society on 04.04.2014. The petitioner undertook to carry out the construction, designing and development of the 448 units at the rate of Rs. 1790 per sq. ft.
The petitioner, as per the agreement, mobilized itself at the site but could not commence the work as after execution of construction agreement, Section 144 Cr.P.C. was imposed for some time at the project site and MADA approval was pending as fire clearance was declined twice because access to the project site was less than 12 ft. However, after having taken sincere efforts, approval was given in the month of March, 2015 and accordingly work was commenced.
As per the agreement, time for completion of work was 36 months, i.e., till March, 2018 effective from 07 days from the date of approval. At the time of commencement, all the blocks were not handed over to the petitioner-applicant and the respondent handed over only 05 towers, i.e., B, D, F, H & I for commencement of construction work. The petitioner-applicant in order to further expedite the execution of the project to ensure timely completion, sought permission of the respondent society to appoint NSS and Co. as sub-contractor for various works at the project site. It was, however, clarified to the respondent-society that the petitioner-applicant shall continue to be the sole contractor for the work and all responsibilities as mentioned in the agreement with the society will continue to be borne by the petitioner-applicant and the sub- contractor shall be appointed to work under the petitioner-applicant.
The petitioner, since, was concerned about the timely completion of the project, as such, in compliance of Clause 21(d) furnished a bank guarantee of Rs. 4 crores in faovur of the respondent- society which was subsequently renewed as and when occasion arose.
The petitioner, in the first year, submitted bills of Rs. 29.48 crores out of which Rs. 21.70 crores was cleared by the respondent- society withholding an amount of Rs. 7.78 crores. As the amount of outstanding from the bills increased with the respondent-society and looking at the progress of work, the respondent-society in keeping with Clause 21(d) of the agreement for construction dated 25.01.2014 did not require the petitioner to renew the bank guarantee. Thus, the bank 3 guarantee was not renewed beyond 17.02.2016. It was only on 11.06.2018, after the first extension was granted to the petitioner-
applicant, the respondent-society raised the issue of non-submission of bank guarantee of Rs. 10 crores and said that in case the bank guarantee is not submitted, the dues amount of the petitioner-applicant will be treated as bank guarantee up to Rs. 10 crores and any amount over and above shall only be released to the petitioner-applicant.
The petitioner company was allowed to commence work only in five blocks for the first three years while withholding four blocks, which blocks were allowed to be constructed as late as in 2017. However, work on two blocks, namely, E & G could not be commenced even in 2017 and thereafter because they did not have the requisite bookings for the said blocks for ensuring payments of the bills towards construction for the said two blocks. But despite the repeated requests made by the petitioner-applicant regarding the booking status of the flats, the respondent-society failed miserably. The petitioner-applicant raised the issue of delay with the respondent-society in several correspondences but the respondent-society failed to take any corrective measures to streamline the payment situation and co-operate with the petitioner and the staff working at the site.
The grievance of the petitioner-applicant is that due to laches committed on the part of the respondent-society, the delay has been caused in completion of the work within the stipulated time and further due to non-disbursement of the amount, the petty contractors refused to work at site.
It is the case of the petitioner-applicant that as per the agreement, the respondent society was obliged to form a committee of authorized body for inspection and monitoring at site, however, the same was not formed by the respondent-society which caused confusion amongst the members of the society.
The respondent-society has finally terminated the construction agreement vide letter dated 08.01.2020, since, only 37.50 % of payment has been released in favour of the petitioner-applicant over and above 52.5% of the work already completed. Therefore, according to the 4 petitioner-applicant, the entitlement of further payment of Rs.14,90,79,074/- has arisen.
The petitioner-applicant filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, being Arbitration Miscellaneous Case No. 04 of 2020 before the Court of Bokaro. The respondent-society proceeded with the measurement of the unbilled work unilaterally despite request of the petitioner-applicant for joint measurement. The respondent-society has unilaterally measured the project and did not allow the petitioner-applicant to participate in the measurement which called immediate indulgence. The petitioner-applicant, thereafter, invoked arbitration as per Clause 43 of the construction agreement dated 25.01.2014 by giving a legal notice on 14.02.2020 stating therein that if the arbitrator will not be appointed, the petitioner-applicant will move an appropriate petition for appointment of arbitrator before the Court.
It is the case of the petitioner-applicant that no response to the legal notice has been furnished, rather, it has been informed to the petitioner-applicant that arbitrator has been appointed with the consent of the petitioner-applicant and the sub-contractor in terms of the construction agreement.
3. The learned counsel for the petitioner-applicant has submitted by referring to arbitration clause as under Clause 43 of the construction agreement which stipulates that in case of any dispute, the arbitrator will be appointed with the mutual consent and as such, the legal notice has been given to the society as on 14.02.2020 for appointment of arbitrator but instead of appointing an arbitrator with the mutual consent of the parties, unilaterally the arbitrator has been appointed and as such, the instant application has been filed.
4. It is the specific case of the petitioner-applicant that there is no mutual consent as required for appointment of arbitrator as under Clause 43 of the agreement, therefore, the decision of the respondent-society in appointing the arbitrator in absence of mutual consent of the petitioner- applicant is nothing but contrary to the terms and conditions of the agreement, as such, the prayer has been made by filing the instant application for appointment of arbitrator for resolution of dispute.
55. Mr. Sumeet Gadodia, learned counsel appearing for the respondent- society has raised the issue of maintainability of the instant application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996. He has submitted that it is not correct on the part of the petitioner- applicant that the respondent-society has appointed the arbitrator without the consent of the petitioner-applicant rather according to him, there is oral consent and once the arbitrator has been appointed in terms of the arbitration clause with the consent of the parties, there cannot be any direction by this Court for appointment of arbitrator by passing an order under Section 11(6) of the Act, 1996.
He has submitted that once the arbitrator has been appointed, this Court will be ceased from the jurisdiction in exercising the power conferred under Section 11(6) of the Act, 1996 and in order to buttress his argument has relied upon the judgment rendered by Hon'ble Apex Court in Antrix Corporation Limited vs. Devas Multimedia Private Limited, (2014) 11 SCC 560 as also in S.P. Singla Constructions Private Limited vs. State of Himachal Pradesh and Anr., (2019) 2 SCC
488.
6. We have heard the learned counsel for the parties and perused the documents available on record as also the construction agreement dated 25.01.2014.
7. Admittedly herein as per the arbitration clause as under Clause 43, the parties have agreed for appointment of arbitrator with the mutual consent as would be evident from the said clause which reads as under:
―43. Arbitration: Any dispute and difference, if arise between the parties, same shall be referred to a Sole Arbitrator, appointed on mutual consent of the parties and in accordance with the provisions of Arbitration. Such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The place of arbitration shall be BOKARO STEEL CITY. All legal disputes shall be subject to the jurisdiction of courts in Bokaro only.‖
8. The issue has been raised on behalf of the respondent-society about holding the instant application not maintainable since according to the learned counsel, the arbitrator had already been appointed with the oral consent of the petitioner-applicant. The said aspect of the matter has seriously been disputed, therefore, this Court vide order dated 09.12.2020 had passed an order to the effect that the copies of the entire 6 records of the Arbitrator starting from appointment of the Arbitrator and initiation of the proceedings, be brought on record by way of an affidavit.
It further appears from the said order that taking into consideration the issue involved, ad-interim order was passed to the effect of passing no final award by the Arbitrator. The said order is being reproduced as under:
―With consent of the parties, hearing of this matter has been done through video conferencing. They have no complaint about any audio and visual quality.
Heard the parties in part.
Put up this case on 22nd of January, 2021 for further hearing.
In the meantime, let the respondent obtain copies of the entire records of the Arbitrator, starting from appointment of the Arbitrator and initiation of the proceedings and bring on record the same after serving a copy upon the petitioner well in advance.
In the meantime, let no final Award be pronounced by the Arbitrator till the next date of hearing.
Since this Court has been informed that the Arbitrator has fixed time for final pronouncement at 3.30 p.m. today Itself, let both the parties inform the Arbitrator regarding this order without waiting for getting a copy of this order.‖
9. The respondent-society, in terms of the direction passed by this Court on 09.12.2020, has brought the entire records by way of supplementary affidavit filed on 16.01.2021. This Court has scrutinized the record. It appears from the record that the decision for appointment of Arbitrator has been taken as under proposal no. 9 in the meeting held on 14.12.2019.
It first requires to refer herein that the meeting was conducted on 14.12.2019 of the members of the society bearing their signatures. It further requires to refer herein that in the said meeting, the representative of the petitioner-applicant was not present. This aspect of the matter is not in dispute.
It appears from the decision taken as under agenda no. 9 that the members of the society taking into consideration the dispute arisen in between the respondent-society and the petitioner-applicant pertaining to construction of multi storeyed quarters, a decision for appointment of 7 arbitrator had been decided to be taken and accordingly, one Mr. P. S. Dwivedi, Ex-Chief/Law-Bokaro Steel Plant has been appointed as Arbitrator.
It has further been stated in the record that the Chairman of the society is having a talk with M/s Akarshan Infradevelopers Pvt. Ltd. and M/s NSS and Company who have agreed for appointment of Arbitrator.
10. Mr. Sumeet Gadodia, learned counsel for the respondent-society has submitted by taking this Court to the decision taken as under agenda no.9 to treat it as an oral consent for appointment of arbitrator and accordingly, objection has been made that once the arbitrator has been appointed, the application under Section 11(6) of the Act, 1996 will not be maintainable. To buttress his argument, he has relied upon the judgment rendered by the Hon‟ble Apex Court in Antrix Corporation Limited vs. Devas Multimedia Private Limited (supra) as also S.P. Singla Constructions Private Limited vs. State of Himachal Pradesh and Anr. (supra).
11. This Court, before answering the issue of objection, deems it fit and proper to deal with the judgment upon which reliance has been placed by the learned counsel for the respondent-society.
It requires to refer herein that in Antrix Corporation Limited vs. Devas Multimedia Private Limited (supra), as under paragraph-3 of the judgment, a question has been framed as to whether, once an Arbitral Tribunal has been constituted, the court has jurisdiction under Section 11 of the Act to interfere and constitute another tribunal?
The matter has finally been referred before the Larger Bench and thereby, the issue has been answered having been reported in (2014) 11 SCC 574.
This Court is required to see under what background of the facts such issue has been framed for which this Court has considered the factual aspect involved in the said case and therefrom it is evident that M/s Antrix Corpn. Ltd., was engaged in the marketing and sale of products and services of the Indian Space Research Organization (ISRO), entered into an agreement with the respondent, Devas 8 Multimedia (P) Ltd. on 28.01.2005, for the lease of Space Segment Capacity on ISRO/Antrix S-Band Spacecraft. Article 19 of the agreement empowered the petitioner to terminate the agreement in certain contingencies.
Article 20 of the agreement deals specially with arbitration and provides that in the event any dispute or difference arises between the parties as to any clause or provision of the agreement, or as to the interpretation thereof, or as to any account or valuation, or as to rights and liabilities, acts, omissions of any party, such disputes would be referred to the senior management of both the parties to resolve the same within 3 weeks, failing which the matter would be referred to an Arbitral Tribunal comprising of three arbitrators.
On 25.02.2011, the petitioner Company terminated the agreement with immediate effect in terms of Article 7(c) read with Article 11(b) of the agreement in keeping with the directives of the Government, which it was bound to follow under Article 103 of its articles of association. The respondent objected to the termination. On 15.04.2011, the petitioner Company sent to the respondent Company a cheque for Rs 58.37 crores refunding the upfront capacity reservation fee received from Devas. The said cheque was, however, returned by Devas on 18.04.2011, insisting that the agreement was still subsisting.
In keeping with the provisions of Article 20 of the arbitration agreement, the petitioner wrote to the respondent Company on 15.06.2011, nominating its senior management to discuss the matter and to try and resolve the dispute between the parties. However, without exhausting the mediation process, as contemplated under Article 20(a) of the agreement, Devas unilaterally and without prior notice to the petitioner, addressed a request for arbitration to the ICC International Court of Arbitration on 29.06.2011, seeking resolution of the dispute arising under the agreement. Through the unilateral request for arbitration, Devas sought the constitution of an Arbitral Tribunal in accordance with the ICC Rules of Arbitration and nominated one Mr. V.V. Veedar, as its nominee arbitrator, in accordance with the ICC Rules.
9According to the petitioner, it is only on 05.07.2011, that it came to learn that Devas had approached the ICC and had nominated Mr. V.V. Veedar, as its nominee arbitrator, upon receipt of a copy of the respondent's request for arbitration forwarded by the ICC.
The petitioner, being aggrieved with the decision of the ICC in appointing the arbitrator, has invoked the arbitration agreement in accordance with the Uncitral Rules on the ground that Devas has invoked the ICC Rules unilaterally without allowing the petitioner to exercise its choice. Having invoked the arbitration agreement under Uncitral Rules, the petitioner called upon the respondent to appoint its arbitrator within 30 days of receipt of the notice. The aforesaid order having not been responded, an application under Section 11 (4) read with Section 11(10) of the 1996 Act came to be filed by the petitioner, inter alia, for a direction upon Devas to nominate its arbitrator in accordance with the agreement dated 28.01.2005 and the Uncitral Rules, to adjudicate upon the disputes, which had arisen between the parties and to constitute the Arbitral Tribunal and to proceed with the arbitration.
12. It is in this background, the issue has been framed as to whether, once an Arbitral Tribunal has been constituted, the court has jurisdiction under Section 11 of the Act to interfere and constitute another tribunal and it is in that background the Hon‟ble Apex Court has laid down as under
paragraph-34 that where an arbitrator as already been appointed and intimation has been conveyed to the other party, a separate application for appointment of an arbitrator is not maintainable. Once the power has been exercised under the arbitration agreement, there is no power left to, once again, refer the same disputes to arbitration under Section 11 of the 1996 Act, unless the order closing the proceedings is subsequently set aside. The said paragraph of the aforesaid judgment reads as under:
―34. The law is well settled that where an arbitrator had already been appointed and intimation thereof had been conveyed to the other party, a separate application for appointment of an arbitrator is not maintainable. Once the power has been exercised under the arbitration agreement, there is no power left to, once again, refer the same disputes to arbitration under Section 11 of the 1996 Act, unless the order closing the proceedings is subsequently set aside. In Som Datt Builders (P) Ltd. v. State of Punjab [AIR 2006 P&H 124 : (2006) 3 RAJ 144] , the Division Bench of the Punjab and Haryana High Court held, and we agree with the finding, that when the Arbitral Tribunal is already seized of the disputes between the parties to the arbitration agreement, 10 constitution of another Arbitral Tribunal in respect of those same issues which are already pending before the Arbitral Tribunal for adjudication, would be without jurisdiction.‖
13. It further appears from paragraph-35 of the aforesaid judgment that where the parties had agreed that the procedure for the arbitration would be governed by the ICC Rules, the same would necessarily include the appointment of an Arbitral Tribunal in terms of the arbitration agreement and the said Rules. The said paragraph of the aforesaid judgment reads as under:
"35. In view of the language of Article 20 of the arbitration agreement which provided that the arbitration proceedings would be held in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL, Devas was entitled to invoke the Rules of Arbitration of ICC for the conduct of the arbitration proceedings. Article 19 of the agreement provided that the rights and responsibilities of the parties thereunder would be subject to and construed in accordance with the laws of India. There is, therefore, a clear distinction between the law which was to operate as the governing law of the agreement and the law which was to govern the arbitration proceedings. Once the provisions of the ICC Rules of Arbitration had been invoked by Devas, the proceedings initiated thereunder could not be interfered with in a proceeding under Section 11 of the 1996 Act. The invocation of the ICC Rules would, of course, be subject to challenge in appropriate proceedings but not by way of an application under Section 11(6) of the 1996 Act. Where the parties had agreed that the procedure for the arbitration would be governed by the ICC Rules, the same would necessarily include the appointment of an Arbitral Tribunal in terms of the arbitration agreement and the said Rules. Arbitration Petition No. 20 of 2011 under Section 11(6) of the 1996 Act for the appointment of an arbitrator must, therefore, fail and is rejected, but this will not prevent the petitioner from taking recourse to other provisions of the aforesaid Act for appropriate relief.
14. It is, thus, evident that the arbitrator has been appointed in the said case and the factual aspect revolves around the ICC Rules wherein under Article 20, condition has been made to the effect that arbitrator can be appointed and in that view of the matter on the basis of the application made by the Devas the arbitrator has been appointed and in that scenario, the Hon‟ble Apex Court has answered that once the arbitrator has been appointed, there is no occasion to entertain the application filed under Section 11 of the Act, 1996 for appointment of arbitrator unless the order passed by the Court is set aside.
15. This Court has proceeded to examine the factual aspect of the given case and found therefrom by the bare reading of the Clause 43 wherein stipulation has been made for appointment of arbitrator with mutual consent of the parties. The mutual consent cannot be construed to be oral 11 one as the point is being taken on behalf of the respondent-society by making refrence of the decision of the society as was taken under agenda no.9 in the meeting held on 14.12.2019. It has already been referred hereinabove that contents of the said meeting does not confer that there was any oral consent of the petitioner-applicant rather it has been referred therein that the Chairman of the society has contacted the petitioner-applicant and has agreed for appointment of arbitrator but very surprisingly such reference of the consent of petitioner-applicant has been incorporated even though no representative of the petitioner- applicant company was present in the meeting. For ready reference, the content of agenda/proposal no.9 is being reproduced as under:
"izLrko la[;k%9&cSBd dks lEcksf/kr djrs gq, lfefr ds v/;{k Jh ,0ds0 flag ds }kjk crk;k x;k fd M/s Aakarshan Infra Developers Pvt. Ltd. ds lkFk lfefr ds Agreement ds Point No. 43 ij nksuksa i{kksa ds chp fookn dh fLFkfr esa Arbitration ds rgr le>kSrk djus dh lgefr gqbZ gSA orZeku le; esa M/s Aakarshan Infra Developers Pvt. Ltd. ds fdz;k dykiksa dks ns[krs gq, fookn dh fLFkfr mRiUu gks x;h gSA bl lEcU/k esa esjs }kjk M/s Aakarshan Infra Developers Pvt. Ltd. ,oa NSS & Company ls ckr dh x;h muds }kjk dgk x;k fd geyksx vius le>kSrs ds vuq:i fookn dk fuiVkjk Arbitration ls dj ysaA bu yksxksa }kjk Sri P.S. Dwivedi, Ex- Chief/Law-Bokaro Steel Plant dks Sole Arbitrator ds :i esa U;wDr djus dk izLrko fn;k x;k] mifLFkr lfefr ds lnL;ksa us loZlEefr ls fu.kZ; fy;k fd M/s Aakarshan ,oa M/s NSS & Company }kjk Sri PS Dwivedi, Ex-Chief Law/BSL dks Sole Arbitrator ds :i esa Lohdk;Z fd;k tk, loZlEefr ls mifLFkr lnL;ksa us Sri PS Dwivedi, Ex-Chief/Law-BSL dks Sole Arbitrator ds :i esa Appointment ,oa vuqeksnu fd;k x;kA"
16. Learned counsel for the respondent-society in view of the fact that the decision of the society as under agenda/proposal no.9 is by way of oral consent and once the oral consent has been granted there is no occasion for filing the application under Section 11(6) of the Act, 1996 and in view of the ratio laid down by the Hon‟ble Apex Court in Antrix Corporation Limited vs. Devas Multimedia Private Limited (supra), this Court, of the view that the factual aspect of the said case is quite different to that of the present case since in Antrix Corporation Limited vs. Devas Multimedia Private Limited (supra), one of the parties has approached under the ICC Rules which contains as under Article 20, an 12 arbitration clause and in that circumstances, when the arbitrator has been appointed in view of Article 20 thereof, the Hon‟ble Apex Court has propounded that once the arbitrator has been appointed under the agreement, fresh application under Section 11(6) of the Act, 1996 cannot be maintainable. But, in the given case, there is no reference of any other agreement save and except the agreement dated 25.01.2014 under which it is being stated that the arbitrator has been appointed with the oral consent of the petitioner/applicant, as such, the principle of filing application under Section 11(6) of the Act, 1996 in the facts of the given case, as has been held in Antrix Corporation Limited vs. Devas Multimedia Private Limited (supra), will not be applicable.
17. This Court, further, is of the view that there cannot be any oral consent in absence of a party. If the oral consent can be said to be a consent if such consent has dully been signed by the concerned party but herein as would appear from the records, it is evident that the petitioner-applicant has never attended the meeting held on 14.12.2019 rather when due communication was made for appointment of arbitrator, the repeated objection has been made to the arbitrator even not to proceed with the arbitration proceeding.
18. Mr. Sumeet Gadodia, learned counsel for the respondent-society has taken the point by referring to the arbitration application wherein reference of the joint measurement has been made which according to him, is a consented re-measurement of the work executed but we are not concerned with the merit of the issue at this stage since the issue required to be adjudicated by the arbitrator and this Court is at the referral stage. Moreover, the pleading as under paragraph-21 with respect to the joint measurement said to have been conducted in the month of February, 2020, is having no bearing with the decision of the society taken on 14.12.2019.
19. One additional point has been taken by making reference of the interlocutory application said to have been filed under Section 14 of the Act, 1996 and by referring the same, submission has been made that filing of the aforesaid application under Section 14 will be considered to 13 be acceptance on the part of the petitioner-applicant about initiation of arbitration proceeding.
20. Learned counsel for the petitioner-applicant has submitted that the aforesaid application has been filed due to bona fide mistake since the jurisdiction to entertain an application filed under Section 14 of the Act, 1996 is not with the High Court in a pending proceeding of Section 11(6) rather such application is to be filed before the commercial court having its jurisdiction, therefore, such application may not be considered making inference of the pendency of the arbitration proceeding.
21. This Court has appreciated the rival submission advanced on this issue and considering the scope of the provision of Section 14 of the Act, 1996, which stipulates that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, meaning thereby, Section 14 is with respect to termination of the mandate of an arbitrator in case of failure or impossibility to act, i.e., if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and if he withdraws from his office or the parties agree to the termination of his mandate.
22. Admittedly, such application can only be filed before the competent court having its jurisdiction under the Commercial Courts Act after its enactment and not to be entertained in a proceeding by the High Court in exercise of power under Section 11(6) of the Act, 1996, therefore, this Court is of the view that even though such application has been filed but it will not be fit for this Court to infer any conclusion merely on the basis of the pendency of the arbitration proceeding. Fact remains, the arbitrator is to be appointed on the basis of the arbitration clause and when the arbitration clause reflects for appointment of arbitrator with the mutual consent then in absence of consent if the arbitrator has been appointed unilaterally, the same will be illegal as has been held by Hon‟ble Apex Court in Dharma Prathishthanam vs. Madhok Construction (P) Ltd., (2005) 9 SCC 686 wherein at paragraph-12 is has been laid down that if the arbitration clause does not name an arbitrator but provides for the manner in which the arbitrator is to be chosen and appointed, then the parties are bound to act accordingly. If the parties do not agree then 14 arises the complication which has to be resolved by reference to the provisions of the Act. One party cannot usurp the jurisdiction of the court and proceed to act unilaterally. A unilateral appointment and a unilateral reference - both will be illegal. Paragraphs-12 & 31 of the said judgment read as under:
"12. On a plain reading of the several provisions referred to hereinabove, we are clearly of the opinion that the procedure followed and the methodology adopted by the respondent is wholly unknown to law and the appointment of the sole arbitrator Shri Swami Dayal, the reference of disputes to such arbitrator and the ex parte proceedings and award given by the arbitrator are all void ab initio and hence nullity, liable to be ignored. In case of arbitration without the intervention of the court, the parties must rigorously stick to the agreement entered into between the two. If the arbitration clause names an arbitrator as the one already agreed upon, the appointment of an arbitrator poses no difficulty. If the arbitration clause does not name an arbitrator but provides for the manner in which the arbitrator is to be chosen and appointed, then the parties are bound to act accordingly. If the parties do not agree then arises the complication which has to be resolved by reference to the provisions of the Act. One party cannot usurp the jurisdiction of the court and proceed to act unilaterally. A unilateral appointment and a unilateral reference -- both will be illegal. It may make a difference if in respect of a unilateral appointment and reference the other party submits to the jurisdiction of the arbitrator and waives its rights which it has under the agreement, then the arbitrator may proceed with the reference and the party submitting to his jurisdiction and participating in the proceedings before him may later on be precluded and estopped from raising any objection in that regard. According to Russell (Arbitration, 20th Edn., p. 104)--
―An arbitrator is neither more nor less than a private judge of a private court (called an Arbitral Tribunal) who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him; ... He is private insofar as (1) he is chosen and paid by the disputants, (2) he does not sit in public, (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy, (4) so far as the law allows he is set up to the exclusion of the State courts, (5) his authority and powers are only whatsoever he is given by the disputants' agreement, (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of these powers must not be contrary to the proper law of the contract or the public policy of England, bearing in mind that the paramount public policy is that freedom of contract is not lightly to be interfered with.‖
31. Three types of situations may emerge between the parties and then before the court. Firstly, an arbitration agreement, under examination from the point of view of its enforceability, may be one which expresses the parties' intention to have their disputes settled by arbitration by using clear and unambiguous language, then the parties and the court have no other choice but to treat the contract as binding and enforce it. Or, there may be an agreement suffering from such vagueness or uncertainty as is not capable of being construed at all by culling out the intention of the parties with certainty, even by reference to the provisions of the Arbitration Act, then it shall have to be held that there was no agreement between the parties in the eye of the law and the question of appointing an arbitrator or making a reference or disputes by reference to Sections 8, 9 and 20 shall not arise. Secondly, there may be an arbitrator or 15 arbitrators named, or the authority may be named who shall appoint an arbitrator, then the parties have already been ad idem on the real identity of the arbitrator as appointed by them beforehand; the consent is already spelled out and binds the parties and the court. All that may remain to be done in the event of an occasion arising for the purpose, is to have the agreement filed in the court and seek an order of reference to the arbitrator appointed by the parties. Thirdly, if the arbitrator is not named and the authority who would appoint the arbitrator is also not specified, the appointment and reference shall be to a sole arbitrator unless a different intention is expressly spelt out. The appointment and reference -- both shall be by the consent of the parties. Where the parties do not agree, the court steps in and assumes jurisdiction to make an appointment, also to make a reference, subject to the jurisdiction of the court being invoked in that regard. We hasten to add that mere inaction by a party called upon by the other one to act does not lead to an inference as to implied consent or acquiescence being drawn. The appellant not responding to the respondent's proposal for joining in the appointment of a sole arbitrator named by him could not be construed as consent and the only option open to the respondent was to have invoked the jurisdiction of court for appointment of an arbitrator and an order of reference of disputes to him. It is the court which only could have compelled the appellant to join in the proceedings.‖
23. This Court, after having discussed the factual aspect and the legal position as also considering the arbitration clause as contained under Clause 43 of the construction agreement dated 25.01.2014 and on consideration of the decision of the society as has been taken in the meeting held on 14.12.2019, wherein, decision for appointment of arbitrator has been taken, cannot be construed to be an oral consent in absence of participation of the authorized representative of the company, therefore, the agreement since contains a condition of appointment of arbitrator with the mutual consent of the parties but consent of the petitioner-applicant having not been taken, the appointment of arbitrator is held to be unilateral and not in consonance with the stipulation made under Clause 43 of the construction agreement dated 25.01.2014.
Accordingly, the objection as has been raised by the respondent-society is, hereby, over-ruled.
24. In view of the discussion made hereinabove, since this Court has come to the conclusion by holding the appointment of arbitrator as illegal, as such, the very proceeding of the arbitration is also held to be illegal and in consequence thereof, the interim order dated 09.12.2020, by which the Arbitral Tribunal was directed not to pass final award, is hereby, made absolute.
16I.A. No. 331 of 2021:
25. The instant intervention application, being I.A. No. 331 of 2021, has been filed for seeking a direction from this Court for impleadment of M/s NSS and Co. as party-respondent to the proceeding.
26. This Court considers it to deal with the aforesaid application, for the reason the proposed intervener is seeking a direction for impleadment as party respondent in the instant proceeding since his interest is also at stake as he is the petty contractor having been appointed by the petitioner-applicant as such, he is having the same interest as that of the petitioner-applicant.
27. It has been stated in the intervention application that for the purpose of construction of multi storeyed residential quarters of respondent-Bokaro Steel Officers Housing Co-operative Society Ltd. at Ranipokhar, Bokaro by virtue of sub-contract agreement dated 01.07.2015 with principal contractor M/s Akarshan Infradevelopers Pvt. Ltd. which had been awarded the contract by virtue of agreement dated 25.01.2014 by respondent-Bokaro Steel Officers Housing Co-operative Society Ltd.
His grievance is that even though as per the agreement dated 01.07.2015, the whole construction work of respondent-society was given to the intervenor/proposed respondent as a sub-contractor by the principal contractor, namely, M/s Akarshan Infradevelopers Pvt. Ltd., the petitioner-applicant therein, but the money has not been disbursed as per the agreed terms and conditions with the petitioner-applicant, as such, he is also having the grievance, therefore, the instant application has been filed.
28. Serious objection has been made on behalf of the learned counsel for the petitioner-applicant as also on behalf of the respondent-society by raising the dispute that the instant interlocutory application is not maintainable reason being that it has not been disclosed as to under which provision of law the instant application has been filed for leave of this Court for impleadment of M/s NSS and Co. as party respondent.
It has been submitted that it is the admitted case of the proposed intervenor that the agreement in question contains the arbitration clause 17 which is the subject matter of the application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 is in no-way related with the applicant of the instant interlocutory application since it is the admitted case of the applicant of the instant application that the work has been assigned by way of sub-contract by enriching an agreement with the petitioner-applicant on 01.07.2015, as such, whatever grievance of the applicant of the instant application is there, the same is with the petitioner-applicant, hence, the instant interlocutory application is not maintainable seeking impleadment as party respondent.
29. This Court has considered the rival submissions advanced on behalf of the parties and in order to adjudicate the maintainability of the instant application, deems it fit and proper to refer certain provisions of Arbitration and Conciliation Act, wherein, relevant would be the definition of „party‟ and as per the definition of „party‟ referred under Section 2(h) of the Act, 1996 it means „a party to an arbitration agreement‟, meaning thereby, the order which is being sought for, for appointment of arbitrator by invoking the jurisdiction conferred to this Court under Section 11(6) of the Act, 1996, the party must be a party to the arbitration agreement.
It also requires to refer herein the meaning of arbitration agreement as under Section 7 under Chapter-II of the Act, 1996 which reads as under:
―7. Arbitration agreement. - (1) In this Part, ―arbitration agreement‖ means 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. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties;
(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
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.‖ 18 It is evident from the provision of Section 7 wherein it has been stated that the "arbitration agreement" means 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.
Further as would appear from sub-section (2) thereof that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
Sub-section (3) thereof contains the provision to the effect that an arbitration agreement shall be in writing.
Further, it would be evident from sub-section (4) thereof that an arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties;
(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
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other Sub-section (5) thereof contains the provision to the effect that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
30. Section 11 of the Act, 1996 is also required to refer herein wherein it has been provided as under sub-section (2) thereof that subject to sub-section (6), the parties are free to agree on procedure for appointing the arbitrator or arbitrators.
It would be evident from the provision of Section 11 that the reference of „party‟ has been made in the provision contained therein as also under sub-section (6) to the effect that if a party fails to act as required under that procedure; or the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that 19 procedure; or a person, including an institution, fails to perform any function entrusted to him or it under that procedure.
31. It is, thus, evident from the word „party‟ that it is having significance to maintain an application filed for appointment of arbitrator. Here, in the given facts of the case it is the admitted fact as would appear from paragraph-4 of the instant application that the applicant of the instant application has entered into a sub-contact on 01.07.2015 with the principal contractor, namely, M/s Akarshan Infradevelopers Pvt. Ltd., the petitioner-applicant herein, in whose favour the work order was awarded by virtue of the agreement dated 25.01.2014 by the Bokaro Steel Officers Housing Co-operative Society Ltd. for construction of multi storeyed quarters, a such, there is no dispute about the fact that the applicant of the instant application is not a party to the original agreement dated 25.01.2014 enriched in between the petitioner-applicant and the respondent-society which contains an arbitration clause as under
Clause 43.
32. It is evident from the pleading made in the instant application that the sub-contract agreement dated 01.07.2015 is in between M/s Akarshan Infradevelopers Pvt. Ltd and M/s NSS and Company. For ready reference, the party position of the said sub-contract agreement dated 01.07.2015 is being reproduced as under:
―This agreement is made in Bokaro, Jharkhand on this 1st July 2015 by and between M/s Akarshan Infradevelopers Pvt. Ltd. a Private Limited Company CIN No. U45200DL2013PTC256103 having its registered office at 23, Block No. B/6-7, Local Shopping Centre, Safdarjung Enclave, New Delhi- 110029 represented by Mr. Anand Anu, Director, hereinafter referred to as ―Contractor‖ (which expression shall unless it is repugnant to the context shall mean and include its successors in interest) of the first part.
AND M/s NSS AND COMPANY, a proprietorship firm having its registered office at N2/146, IRC Village, Nayapally, Bhubhneshwar-751015 (Orissa) represented by its proprietor Mr. Nilesh Singh Solankee PAN No. AOUPS1814E, hereinafter referred to as ‗Sub-Contractor' (which expression shall unless it be repugnant to the context shall mean and include its successor(s) in-interest) of the second part.‖ It further appears from the aforesaid agreement which does not contain any arbitration clause. The question which now is to be decided by this Court is that in absence of any arbitration clause in the said contract agreement dated 01.07.2015, can this application for 20 impleadment of party to the proceeding in the original application is fit to be allowed?
33. This Court has found from the statutory provision as referred hereinabove that the application under Section 11(6) is to be entertained on behalf of the parties if they are party to the agreement. The applicant of the instant interlocutory application, admittedly, is not party to the agreement dated 25.01.2014, as such, according to the considered view of this Court, he is not an appropriate party for impleadment in the arbitration application.
Further, the application has been filed without invoking any jurisdiction conferred to this Court for allowing the instant interlocutory application.
34. Learned counsel for the applicant has submitted that he has been allowed to participate before the Arbitral Tribunal being presided over by the Mr. P. S. Dwivedi, Ex-Chief/Law-Bokaro Steel Plant, as such, he has got locus to file this interlocutory application.
35. This Court, is of the view that such submission is not fit to be acceptable reason being that once the Arbitral Tribunal which was appointed by virtue of the meeting dated 14.12.2019 has been held to be illegal by this Court as above, even though, the applicant of the instant interlocutory application was participating in the proceeding before such Tribunal, the entire proceeding will be rendered to be null and void and in that view of the matter, even though, the applicant has participated in the proceeding, no locus will be created for impleadment as party to the proceeding.
36. This Court has posted a pin pointed question upon the learned counsel for the applicant of the instant interlocutory application as to under which provision of law the instant application has been filed for impleadment of the party to the proceeding.
Mr. Deepak Bharti, learned counsel for the applicant of the instant application has failed to satisfy this Court by giving any statutory answer in this regard.
2137. This Court, therefore, is of the view that the instant application is fit to be held as not maintainable, as such, the same is held to be not maintainable, accordingly, the instant interlocutory application stands disposed of.
Conclusion/Result:
38. This Court, in consequence of the finding recorded hereinabove, is of the view that it is a fit case where the power conferred to this Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 is required to be exercised for appointment of Arbitrator, considering Clause 43 of the contract agreement dated 25.01.2014.
39. Learned counsel for the parties have agreed for appointment of Hon‟ble Mr. Justice Tapen Sen (Retd.), High Court of Jharkhand to act as an Arbitrator.
Accordingly, this Arbitration Application is being disposed of by appointing Hon‟ble Mr. Justice Tapen Sen (Retd.), High Court of Jharkhand as sole Arbitrator for resolution of dispute.
40. Needless to say that the parties will be at liberty to raise all the legal issues for its consideration by the Arbitrator, in accordance with law.
41. It is expected that the Arbitrator will conclude the proceeding within the timeframe as provided under the Act.
42. Learned Registrar General of this Court is directed to send a copy of the entire records of this case along with entire order sheet with this order to the learned Arbitrator forthwith.
43. Both the parties shall co-operate in the hearing before the learned Arbitrator and they shall not ask for any unnecessary adjournment.
44. The instant arbitration application is allowed and accordingly, disposed of.
(Sujit Narayan Prasad, J.) Saurabh