Delhi High Court - Orders
Rudra Buildwell Project Pvt Ltd vs M/S E Tech on 5 February, 2019
Author: Anu Malhotra
Bench: Anu Malhotra
$~53
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CM(M) 200/2019 & CM APPL. 5535/2019
RUDRA BUILDWELL PROJECT PVT LTD ..... Petitioner
Through: Mr. Tanmay Mehta & Mr. Pankaj
Agarwal, Advocates.
versus
M/S E TECH ..... Respondent
Through
CORAM:
HON'BLE MS. JUSTICE ANU MALHOTRA
ORDER
% 05.02.2019
CM APPL. 5536/2019 (Ex.)
Exemption allowed subject to all just exceptions. The application stands disposed of.
CM(M) 200/2019 & CM APPL. 5535/2019 The petitioner assails the impugned order dated 22.12.2018 of the learned ADJ-03, Shahdara in Arbitration Petition no.446/18 and order dated 04.01.2019 in the said proceedings.
Inter alia reliance is placed on behalf of the petitioner on the verdict of the Hon'ble Supreme Court in "Dharma Prathishthanam Vs. M/s Madhok Construction Pvt. Ltd" 2005 (9) SCC 686 in Appeal (Civil) 7140/2004 a judgment dated 02.11.2004 with observations in para 7, 12, 25, 27 & 31, which read to the effect:-
"7. An arbitrator or an Arbitral Tribunal under the Scheme of the 1940 Act is not statutory. It is a forum chosen by the CM(M) 200/2019 Page 1 of 5 consent of the parties as an alternate to resolution of disputes by the ordinary forum of law courts. The essence of arbitration without assistance or intervention of the Court is settlement of the dispute by a Tribunal of the own choosing of the parties. Further, this was not a case where the arbitration clause authorized one of the parties to appoint an arbitrator without the consent of the other. Two things are, therefore, of essence in cases like the present one: firstly, the choice of the Tribunal or the arbitrator; and secondly, the reference of the dispute to the arbitrator. Both should be based on consent given either at the time of choosing the Arbitrator and making reference or else at the time of entering into the contract between the parties in anticipation of an occasion for settlement of disputes arising in future. The Law of Arbitration does not make the arbitration an adjudication by a statutory body but it only aids in implementation of the arbitration contract between the parties which remains a private adjudication by a forum consensually chosen by the parties and made on a consensual reference.
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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 CM(M) 200/2019 Page 2 of 5 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."
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25. Failure to give consent or to appoint an arbitrator in response to a notice for appointment of an arbitrator given by the other party provides justification to the other party for taking action under sub-section (2) of Section 8 of the Act and then it is the court which assumes jurisdiction to appoint an arbitrator as held by the High Court of Orissa in Niranjan Swain v. State of Orissa.
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27. In the event of the appointment of an arbitrator and CM(M) 200/2019 Page 3 of 5 reference of disputes to him being void ab initio as totally incompetent or invalid the award shall be void and liable to be set aside dehors the provisions of Section 30 of the Act, in any appropriate proceedings when sought to be enforced or acted upon. This conclusion flows not only from the decided cases referred to hereinabove but also from several other cases which we proceed to notice.
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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 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 CM(M) 200/2019 Page 4 of 5 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.", and also on the verdict of this Court in "LT COL H.S. BEDI (RETD) & ANR. Vs. STCI FINANCE LIMITED" in O.M.P. (COMM) 427/2018.
Notice of the petition and of the accompanying application CM APPL. 5535/2019 be issued to the respondent on taking of steps by the petitioner, process returnable for 20.03.2019.
Subject to deposit of the sum of Rs. 8 lakhs in the form of an FDR before the learned Trial Court within a week, the operation of the impugned award dated 01.10.2018 of the sole Arbitrator, Mr. S.P. Marwah, shall stand stayed.
ANU MALHOTRA, J FEBRUARY 05, 2019/NC CM(M) 200/2019 Page 5 of 5