Karnataka High Court
M/S Swarna Techno Constructions Pvt. ... vs The Union Of India on 8 February, 2023
Author: S.R. Krishna Kumar
Bench: S.R. Krishna Kumar
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CMP No. 100003 of 2021
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 8TH DAY OF FEBRUARY, 2023
BEFORE
THE HON'BLE MR JUSTICE S.R. KRISHNA KUMAR
CIVIL MISC PETITION NO. 100003 OF 2021
BETWEEN:
M/S SWARNA TECHNO CONSTRUCTIONS PVT. LTD.,
HAVING ITS OFFICE AT
SWARNA CITY CENTRE,
MFC BUILDING,
NEAR RAILWAY STATION ENTRANCE,
STATION ROAD, HUBBALLI-580020,
REP.BY ITS MANAGING DIRECTOR,
S.V. PRASAD.
...PETITIONER
(BY SRI. VASU DEVA NAIDU S., ADVOCATE)
AND:
THE UNION OF INDIA
REP. BY
1. THE GENERAL MANAGER,
SOUTH WESTERN RAILWAY,
GADAG ROAD,
HUBBALLI-580020.
Digitally signed by
CHANDRASHEKAR
LAXMAN
2. THE DIVISIONAL RAILWAY MANAGER
KATTIMANI
Location: High
Court of
HUBBALLI DIVISION,
Karnataka,
Dharwad SOUTH WESTERN RAILWAY,
HUBBALLI-580020.
3. THE DIVISIONAL RAILWAY MANAGER WORKS
HUBBALLI DIVISION,
SOUTH WESTERN RAILWAY,
HUBBALLI-580020.
...RESPONDENTS
(BY SRI MALLIKARJUN S.HIREMATH, ADVOCATE)
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CMP No. 100003 of 2021
THIS CIVIL MISCELLANEOUS PETITION FILED UNDER
SEC.11(6) OF THE ARBITRATION AND CONCILIATION ACT,
1996, PRAYING TO, APPOINT A SOLE ARBITRATOR TO
RESOLVE THE DISPUTES IN AGREEMENT DATED 31.7.2009
AND OUTSTANDING ISSUES BETWEEN THE PARTIES IN
ACCORDANCE WITH THE PROVISIONS OF AGREEMENT
INCONSONANCE WITH ARBITRATION AND CONCILIATION
(AMENDMENT) ACT, 2015, IN THE INTEREST OF JUSTICE AND
EQUITY.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
THE COURT MADE THE FOLLOWING:
ORDER
This petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, "the said Act of 1996") is filed seeking appointment of a Sole Arbitrator to resolve the dispute between the petitioner and respondents in terms of the Arbitration Agreement contained in Clause No.64 of the General Conditions of Contract (for short, "the GCC") to the Agreement dated 30.06.2014 entered into between the petitioner and respondents.
2. The material on record discloses that the petitioner entered into the aforesaid Agreement dated 30.06.2014 with the respondents, which provides that the aforesaid GCC would be applicable to the said Agreement. Clause No.64(3) of the GCC contains an arbitration agreement which provides for -3- CMP No. 100003 of 2021 resolution of disputes by reference to arbitration and both parties have agreed upon a procedure for appointment of arbitrators in terms of Clause No.64(3) of the GCC, which is extracted hereunder for easy reference:
"64.(3) Appointment of Arbitrator :
64.(3) (a)(i) In cases where the total value of all claims in question added together does not exceed Rs.25,00,000 (Rupees twenty five lakh only), the Arbitral Tribunal shall consist of a Sole Arbitrator who shall be a Gazetted Officer of Railway not below JA Grade, nominated by the General Manager. The sole arbitrator shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by GM.
64.(3)(a)(ii) In cases not covered by the Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a Panel of three Gazetted Railway Officers not below JA Grade or 2 Railway Gazetted Officers not below JA Grade and a retired Railway Officer, retired not below the rank of SAG Officer, as the arbitrators.
For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway which may also include the name(s) of retired Railway Officer(s) empanelled to work as Railway Arbitrator -4- CMP No. 100003 of 2021 to the contractor within 60 days from the day when a written and valid demand for arbitration is received by the GM.
Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as contractor's nominee within 30 days from the date of dispatch of the request by Railway. The General Manager shall appoint at least one out of them as the contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'presiding arbitrator' from amongst the 3 arbitrators so appointed. GM shall complete this exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor's nominees. While nominating the arbitrators, it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railway for the purpose of appointment of arbitrator.
64.(3) (a)(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling -5- CMP No. 100003 of 2021 to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re- constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).
64.(3) (a)(iv) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may be necessary to enable the Arbitral Tribunal to make the award without any delay. The Arbitral Tribunal should record day-to-day proceedings. The proceedings shall normally be conducted on the basis of documents and written statements.
64.(3) (a)(v) While appointing arbitrator(s) under Sub-Clause (i), (ii) & (iii) above, due care shall be taken that he/they is/are not the one/those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/their duties as Railway servant(s) expressed views on all or any of the matters under dispute or -6- CMP No. 100003 of 2021 differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will, however, not be invalid merely for the reason that one or more arbitrator had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties expressed views on all or any of the matters under dispute.
64.3 (b)(i) the arbitral award shall state item wise, the sum and reasons upon which it is based. The analysis and reasons shall be detailed enough so that the award could be inferred therefrom.
64.(3) (b)(ii) A party may apply for corrections of any computational errors, any typographical or clerical errors or any other error of similar nature occurring in the award of a Tribunal and interpretation of a specific point of award to Tribunal within 60 days of receipt of the award.
64.(3) (b)(iii) A party may apply to Tribunal within 60 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
64.(4) In case of the Tribunal, comprising of three Members, any ruling on award shall be made by a majority of Members of Tribunal. In the absence of -7- CMP No. 100003 of 2021 such a majority, the views of the Presiding Arbitrator shall prevail.
64.(5) Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made.
64.(6) The cost of arbitration shall be borne by the respective parties. The cost shall inter-alia include fee of the arbitrator(s), as per the rates fixed by Railway Board from time to time and the fee shall be borne equally by both the parties. Further, the fee payable to the arbitrator(s) would be governed by the instructions issued on the subject by Railway Board from time to time irrespective of the fact whether the arbitrator(s) is/are appointed by the Railway Administration or by the Court of law unless specifically directed by Hon'ble Court otherwise on the matter.
64.(7) Subject to the provisions of the aforesaid Arbitration and Conciliation Act 1996 and the rules there under and any statutory modifications thereof shall apply to the arbitration proceedings under this Clause. "
3. Petitioner got issued an arbitration notice dated 17.08.2020 to the respondents calling upon them to constitute -8- CMP No. 100003 of 2021 an Arbitral Tribunal in terms of the appointment procedure provided under Clause No.64(3) referred to supra and the said notice was received by the respondents on 20.08.2020. Since the respondents neither replied to the said notice nor took any steps to constitute an Arbitral Tribunal or appoint arbitrators in terms of the aforesaid arbitration agreement, the petitioner is before this Court by way of the present petition. It is relevant to state that even after the present petition was preferred on 18.12.2020, the respondents have neither constituted an arbitral tribunal nor have they taken any steps to appoint arbitrators in terms of the appointment procedure provided under Clause No.64(3) of the GCC referred to supra.
4. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.
5. In addition to reiterating the various contentions urged in the Memorandum of Petition and referring to the material on record, learned counsel for the petitioner submits that in the light of the arbitration agreement contained in Clause No.64(3) of the GCC, petitioner got issued an arbitration -9- CMP No. 100003 of 2021 notice dated 17.08.2020 to the respondents calling upon them to constitute an arbitral tribunal in terms of the appointment procedure agreed upon between the parties. It is submitted that despite having received the said arbitration notice on 20.08.2020, the respondents failed to act as required under the said appointment procedure agreed upon in Clause No.64(3) of the GCC even after the present petition has been preferred by the petitioner and consequently, the respondents have forfeited their right not only to appoint arbitrators as per Clause No.64(3) but have also forfeited their right to insist upon following the appointment procedure under the said Clause No.64(3) of the GCC and constitute an arbitral tribunal and accordingly, it is necessary that this Court takes necessary measures/steps to appoint/secure appointment of arbitrators to resolve the dispute between the parties as contemplated under Section 11(6) of the said Act of 1996. In support of his contentions, learned counsel for the petitioner placed reliance upon the following decisions:
a) Datar Switchgears Ltd vs. Tata Finance Ltd and another - (2000)8 SCC 151
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b) Punj Lloyd Ltd vs. Petronet MHB Ltd - (2006)2 SCC 638
c) Union of India vs. Bharat Battery Manufacturing Co.(P) Ltd - (2007)7 SCC 684
d) Deep Trading Company vs. Indian Oil Corporation and others - (2013)4 SCC 35
e) M/s Durga Welding Works vs. Chief Engineer, Railway Electrification, Allahabad and another
- Civil Appeal No.54/2022 dated 04.01.2022
f) M/s Gounder Infratech Company vs. The Union of India and others - CMP No.227/2021 dated 13.06.2022
g) Vidya Drolia vs. Durga Trading Corporation -
(2021)2 SCC 1
h) BSNL vs Nortel Networks - (2021)5 SCC 738
6. Per contra, in addition to reiterating the various contentions urged in the Statement of Objections and referring to the documents produced by the respondents, learned counsel for the respondents submit that there is no merit in the petition and the same is liable to be dismissed. In this context, it is submitted that the present petition seeking appointment of a sole arbitrator without following the appointment procedure
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CMP No. 100003 of 2021provided under Clause No.64(3) of the GCC is not maintainable in law. It is also submitted that the petitioner has submitted its final bill on 09.02.2019 which was followed by a 'no claim' certificate dated 26.03.2019 issued by it and in view of Clause No.43(2) of the GCC, the claim of the petitioner is liable to be rejected on this ground also. It is further submitted that pursuant to the final bill submitted on 09.02.2019, petitioner was bound to issue the arbitration notice within 90 days therefrom as provided in Clause No.64(1)(iv) and having issued the arbitration notice only on 17.08.2020 beyond the aforesaid period of 90 days from 09.02.2019, petitioner had waived its claim against the respondents and as such, the petition was liable to be rejected on this score also. In support of his contentions, learned counsel for the respondents placed reliance upon the following decisions:
a) Union of India vs. Parmar Construction Company- (2019) 15 SCC 682 and
b) Central Organisation for Railway Electrification vs. ECI-SPIC-SMO-MCML- (2020)14 SCC 712.
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CMP No. 100003 of 20217. I have given my anxious consideration to the rival submissions and perused the material on record.
8. The question / issue with regard to a party forfeiting his right to appoint an arbitrator and/or insist upon appointment/constitution of an arbitral tribunal in terms of an agreed appointment procedure once a petition / application under Section 11 of the said Act of 1996 has been filed pursuant to a request being made within 30 days as contemplated under Sections 11(3), (4) and (5) and/or failure to act as per the appointment procedure agreed between the parties as contemplated under Sections 11(2) and (6) is no longer res integra, in view of the aforesaid judgments of the Apex Court relied upon by the learned counsel for the petitioner which has been followed by various High Courts including this Court also.
9. In Datar Switchgears case supra, it was held as under:
"5. The Arbitration and Conciliation Act, 1996 made certain drastic changes in the law of arbitration. This Act is codified in tune with the Model Law on International Commercial Arbitration
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as adopted by the United Nations Commission on International Trade Law (UNCITRAL). Section 11 of the Act deals with the procedure for appointment of an arbitrator. Section 11(2) says that the parties are free to agree to any procedure for appointing the arbitrator. If only there is any failure of that procedure, the aggrieved party can invoke sub- sections (4), (5) or (6) of Section 11, as the case may be. In the instant case, the arbitration clause in the lease agreement contemplates appointment of a sole arbitrator. If the parties fail to reach any agreement as referred to in sub-section (2), or if they fail to agree on the arbitrator within thirty days from receipt of the request by one party, the Chief Justice can be moved for appointing an arbitrator either under sub-section (5) or sub- section (6) of Section 11 of the Act.
6. Sub-section (5) of Section 11 can be invoked by a party who has requested the other party to appoint an arbitrator and the latter fails to make any appointment within thirty days from the receipt of the notice. Admittedly, in the instant case, the appellant has not issued any notice to the 1st respondent seeking appointment of an arbitrator. An application under sub-section (6) of Section 11 can be filed when there is a failure of the procedure for appointment of an arbitrator. This failure of procedure can arise under different
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circumstances. It can be a case where a party who is bound to appoint an arbitrator refuses to appoint the arbitrator or where two appointed arbitrators fail to appoint the third arbitrator. If the appointment of an arbitrator or any function connected with such appointment is entrusted to any person or institution and such person or institution fails to discharge such function, the aggrieved party can approach the Chief Justice for appointment of an arbitrator.
7. The appellant in his application does not mention under which sub-section of Section 11 the application was filed. Evidently it must be under sub-section (6)(a) of Section 11, as the appellant has no case that a notice was issued but an arbitrator was not appointed or that there was a failure to agree on a certain arbitrator. The contention of the appellant might be that the first respondent failed to act as required under the procedure.
8. Therefore, the question to be considered is whether there was any real failure of the mechanism provided under the lease agreement. In order to consider this, it is relevant to note the arbitration clause in the agreement.
9. Clause 20.9 of the agreement is the arbitration clause, which is to the following effect:
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"20.9. It is agreed by and between the parties that in case of any dispute under this lease the same shall be referred to an arbitrator to be nominated by the lessor and the award of the arbitrator shall be final and binding on all the parties concerned. The venue of such arbitration shall be in Bombay. Save as aforesaid, the courts at Bombay alone and no other courts whatsoever will have jurisdiction to try suit in respect of any claim or dispute arising out of or under this lease or in any way relating to the same."
10. The above clause gives an unfettered discretion to the 1st respondent-lessor to appoint an arbitrator. The 1st respondent gave notice to the appellant and later appointed the 2nd respondent as the arbitrator. It is pertinent to note that no notice period is prescribed in the above arbitration clause and it does not speak about any concurrence or consent of the appellant being taken in the matter of the choice of an arbitrator.
11. The question then arises whether for purposes of Section 11(6) the party to whom a demand for appointment is made, forfeits his right to do so if he does not appoint an arbitrator within 30 days. Learned Senior Counsel for the appellant contends that even though Section 11(6) does not
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CMP No. 100003 of 2021prescribe a period of 30 days, it must be implied that 30 days is a reasonable time for purposes of Section 11(6) and thereafter, the right to appoint is forfeited. Three judgments of the High Courts from Bombay, Delhi and Andhra Pradesh are relied upon in this connection.
12. Learned Senior Counsel for the respondents submits that the Bombay, Delhi and Andhra Pradesh cases relied upon are distinguishable. It is also contended that under Section 11(6) no period of time is prescribed and hence the opposite party can make an appointment even after 30 days, provided it is made before the application is filed under Section 11.
13. The appellant contended that the 1st respondent did not appoint the arbitrator within a reasonable period and that amounts to failure of the procedure contemplated under the agreement. Our attention was drawn to a decision of the Bombay High Court reported in (Naginbhai C. Patel v. Union of India [(1999) 2 Bom CR 189 (Bom)] ). There, the petitioner, a Government Contractor, as per the form of the arbitration clause requested the Secretary, PWD to appoint the arbitrator. The Secretary, PWD did not take any action and the petitioner filed an application under Section 11(6)
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CMP No. 100003 of 2021of the Act. After the filing of this application, the respondent appointed an arbitrator and urged before the Chief Justice that application under Section 11(6) filed by the petitioner became infructuous. It was held that the petitioner had waited for 30 days for appointment of the arbitrator and as the respondent had failed to appoint the arbitrator the objection was not sustainable and the appointment of arbitrator made by the respondent was not valid in the eye of law.
14. The above decision has no application to the facts of this case as in the present case, the arbitrator was already appointed before the appellant invoked Section 11 of the Act. The counsel for the appellant contended that the arbitrator was appointed after a long lapse of time and that too without any previous consultation with the appellant and therefore it was argued that the Chief Justice should have appointed a fresh arbitrator. We do not find much force in this contention, especially in view of the specific words used in the arbitration clause in the agreement, which is extracted above. This is not a case where the appellant requested and gave a notice period for appointment of an arbitrator and the latter failed to comply with that request. The 1st respondent asked the appellant to make payment within a stipulated period and indicated that in the
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CMP No. 100003 of 2021event of non-payment of the amount within fourteen days, the said notice itself was to be treated as the notice under the arbitration clause in the agreement. The amount allegedly due from the appellant was substantial and the 1st respondent cannot be said to be at fault for having given a larger period for payment of the amount and settling the dispute. It is pertinent to note that the appellant did not file an application even after the 1st respondent invoked Section 9 of the Act and filed a petition seeking interim relief. Under such circumstances, it cannot be said that there was a failure of the procedure prescribed under the contract.
15. The decision of the Delhi High Court in B.W.L. Ltd. v. MTNL [(2000) 2 Arb LR 190 : (2000) 85 DLT 84 (Del)] decided on 23-2-2000 is also distinguishable inasmuch as the respondent, in spite of being given an opportunity on 11-10-1999 by the Court after filing of the application under Section 11 to appoint an arbitrator, failed to do so and the Court felt that it was a fit case for appointment of an arbitrator under Section 11. This case is also distinguishable as the appointment was not made before the filing of the application under Section 11.
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CMP No. 100003 of 202116. In Sharma & Sons v. Engineer-in-Chief, Army Headquarters, New Delhi [(2000) 2 Arb LR 31 (AP)] the respondents were requested on 26-6- 1995, 6-8-1995 and other dates in 1997 to appoint an arbitrator. Application under Section 11 was filed after nearly 4 years on 21-4-1999. Only thereafter the respondent appointed an arbitrator on 13-5- 1999, but only in respect of some of the disputes. The respondent felt that the other disputes were outside the ambit of the arbitration clause. The High Court of Andhra Pradesh held that in view of Section 11(6) read with Section 11(8) the respondent had forfeited his right to appoint an arbitrator after the expiry of 30 days from the date of demand for an arbitrator. Even in the above case, the appointment was not made before the application under Section 11 was filed. Hence, the case is not applicable to the facts of this case.
17. In all the above cases, therefore, the appointment of the arbitrator was not made by the opposite party before the application was filed under Section 11. Hence, all the above cases are not directly in point.
18. In the present case, the respondent made the appointment before the appellant filed the application under Section 11 but the said appointment was made beyond 30 days. Question
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CMP No. 100003 of 2021is whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after the expiry of 30 days from the date of demand?
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 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
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CMP No. 100003 of 2021within 30 days of demand, the right to appoint an arbitrator under Section 11(6) is forfeited.
20. In the present case the respondent made the appointment before the appellant filed the application under Section 11(6) though it was beyond 30 days from the date of demand. In our view, the appointment of the arbitrator by the respondent is valid and it cannot be said that the right was forfeited after expiry of 30 days from the date of demand."
10. The aforesaid decision was followed by a 3 Judge Bench of the Apex Court in its subsequent judgment in Punj Lloyd's case supra, wherein it was held as under:-
"2. The agreement entered into between the parties contains an arbitration clause which reads as under:
"14.1. Disputes or differences arising out of or in relation to agreement/contract shall be referred to the Functional Director of the owner who may either act himself as sole arbitrator or nominate some officer of the owner to act as an arbitrator to adjudicate the disputes and differences between the parties (except those in respect of which the decision of any person is by the contract expressed to be final and binding).
14.2. The contractor shall not be entitled to raise any objection to the appointment of such officer of the owner as the sole arbitrator on
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the ground that the said officer is an officer of the owner or that he/she has to deal or dealt with the matter to which the contract relates or that in the course of duties as an officer of the owner he/she has/had expressed views on all or any of the matters in dispute or difference. 14.3. In the event of the arbitrator to whom the matter is originally referred to is transferred or vacates office, the Functional Director, aforesaid, shall nominate another officer of the owner to act as arbitrator. 14.4. Such officer nominated as sole arbitrator shall be entitled to proceed with the arbitration from the stage at which it was left by the predecessor. It is the term of this contract that no person other than the Functional Director or a person nominated by Functional Director of the owner shall act as arbitrator."
3. Disputes and differences arose between the parties. The appellant served a 30 days' notice on the respondent demanding appointment of an arbitrator and reference of disputes to him. The respondent failed to act. On expiry of 30 days, the appellant moved the Chief Justice of the High Court for appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. Admittedly, even till the date of the moving of the application, the respondent had not made appointment consistently with the arbitration clause. The learned Judge designated by the Chief Justice of the High Court refused to appoint the arbitrator
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CMP No. 100003 of 2021holding that the only remedy available to the appellant was to move in accordance with clause 14.1 abovesaid, whereupon the Functional Director would adjudicate upon the disputes as sole arbitrator.
4. Feeling aggrieved by the abovesaid order, the appellant filed a petition under Article 226 of the Constitution which has also been dismissed. The appellant is before us by way of special leave to appeal.
5. Having heard the learned counsel for the parties, we are satisfied that the appeal deserves to be allowed. The learned counsel for the appellant has placed reliance on the law laid down by this Court in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. [(2000) 8 SCC 151] (SCC p. 158, para 19) wherein this Court has held as under:
"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
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before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases."
6. The case at hand is squarely covered by the abovesaid view of the law taken by this Court. The learned designated Judge of the High Court, as also the Division Bench were not right in taking a contrary view.
7. The appeal is allowed. The order of the learned designated Judge dated 2-4-2004 and the order of the Division Bench dated 7-9-2004 are both set aside. The application filed under Section 11(6) shall stand restored before the learned Chief Justice of the High Court and taken afresh for consideration and appointment of arbitrator in accordance with Section 11(6) of the Arbitration and Conciliation Act, 1996."
11. So also, in Bharat Battery's case supra, it was held as under:
"5. Despite the aforesaid notices and the receipt thereof, the appellant neither resolved the disputes between the parties nor appointed an arbitrator within 30 days from the receipt of the request to do so, compelling the respondent to file a
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petition under Section 11(6) of the Act on 30-3- 2006.
6. Clause 24 of the agreement deals with the arbitration between the parties. The relevant portion of Clause 24 reads as under:
"24. (i) In the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of an officer in the Ministry of Law, appointed to be the arbitrator by the Director General of Supplies and Disposals. It will be no objection that the arbitrator is a government servant that he had to deal with the matters to which the contract relates or that in the course of his duties as a government servant he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the parties to this contract.
(ii) In the event of the arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reason, or his award being set aside by the court for any reason, shall be lawful for the Director General of Supplies and Disposals to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid.
(iii) It is further a term of this contract that no person other than the person appointed by the Director General of Supplies and Disposals as aforesaid should act as arbitrator and that, if for any reason that is not possible, the matter is not to be referred to arbitration at all."
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CMP No. 100003 of 20217. Having stated the brief facts in a nutshell, we may now note a few important dates, which are relevant for the purpose of proper adjudication of the present controversy:
(a) Notices of appointment of arbitrator were issued on 7-6-2005 and 2-1-2006 respectively, which were duly received by the appellant with acknowledgment.
(b) The appellant failed to appoint an arbitrator within 30 days from the date of receipt of request to do so from the respondent.
(c) On 30-3-2006, the respondent filed Section 11(6) petition before the High Court.
(d) The High Court, by the impugned order dated 26-5-2006, appointed Justice K.S. Gupta, a retired Judge, Delhi High Court, as an arbitrator.
(e) On 15-5-2006, the appellant is said to have appointed one Dr. Gita Rawat as a sole arbitrator, purportedly in terms of Clause 24 of the agreement.
8. It is contended by Mr P.P. Malhotra, learned Additional Solicitor General appearing for the appellant, that the High Court did not follow the procedure prescribed under Section 11(8) of the Act. According to him, the appointment of Justice K.S. Gupta as a sole arbitrator is not in consonance with Clause 24 of the agreement inasmuch as Clause 24 of the agreement provides that if any dispute arises, the same shall be referred to the sole arbitration of an officer in the Ministry of Law, appointed to be the
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CMP No. 100003 of 2021arbitrator by the Director General of Supplies and Disposals.
9. We are unable to countenance the submission of the learned counsel for the appellant. Section 11(8) of the Act could have come to the aid of the appellant had the appellant appointed the arbitrator within 30 days from the date of receipt of request to do so from the respondent or the extended time, as the case may be. In the present case, as noticed above, Section 11(6) petition was filed on 30-3-2006 by the respondent. The appellant stated to have appointed one Dr. Gita Rawat on 15- 5-2006 i.e. after Section 11(6) petition was filed by the respondent on 30-3-2006, which is not permissible in law. In other words, the appellants are stopped from making an appointment of the arbitrator in terms of Clause 24 of the agreement after Section 11(6) petition is filed by the respondent. Once Section 11(6) petition is filed before the court, seeking appointment of an arbitrator, the power to appoint an arbitrator in terms of arbitration clause of the agreement ceases.
14. A three-Judge Bench of this Court in Punj Lloyd Ltd. (appellant) v. Petronet MHB Ltd. (2006) 2 SCC 638 considered the applicability of Section 11(6) petition and considered the facts which are similar to the facts of the present case and held that once notice period of 30 days had lapsed, and the party
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CMP No. 100003 of 2021had 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. (appellant) v. Tata Finance Ltd. and Another (2000) 8 SCC 151 wherein at page 158 (para 19) SCC, this Court 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 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
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CMP No. 100003 of 2021right 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."
15. As already noticed, the respondent filed Section 11(6) petition on 30.3.2006 seeking appointment of an arbitrator. The appellant, thereafter, said to have appointed one Dr. Gita Rawat on 15.5.2006 as a sole arbitrator, purportedly in terms of Clause 24 of the agreement. Once a party files an application under Section 11(6) of the Act, the other party extinguishes its right to appoint an arbitrator in terms of the clause of the agreement thereafter. The right to appoint arbitrator under the clause of agreement ceases after Section 11(6) petition has been filed by the other party before the Court seeking appointment of an arbitrator.
16. We are, therefore, of the view that the order of appointment of Dr. Gita Rawat by the appellant as a sole arbitrator dated 15.5.2006 was passed without jurisdiction. Once Section 11(6) petition is filed by one party seeking appointment of an arbitrator, the other party cannot resurrect the clause of the agreement dealing with the appointment of the arbitrator, in this case Clause 24 of the agreement."
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CMP No. 100003 of 202112. Subsequently, in Deep Trading Company's case supra, the said legal position was yet again reiterated by a Three Judge Bench of the Apex Court, which held as under:
"Leave granted. The questions that arise for consideration in this appeal by special leave are whether Respondent 1 has forfeited its right to appoint the arbitrator having not done so after the demand was made and till the appellant had moved the Court under Section 11(6) and, if the answer is in the affirmative, whether the appointment of the arbitrator by Respondent 1 in the course of the proceedings under Section 11(6) is of any legal consequence and the Chief Justice of the High Court ought to have exercised the jurisdiction and appointed an arbitrator?
5. On 9-8-2004, the dealer made a demand to the Corporation by a written notice to refer the disputes between the parties to the arbitrator under the terms of the agreement. In the demand notice, it was also stated by the dealer that if the Corporation fails to appoint the arbitrator, the dealer may be constrained to approach the Court under Section 11 of the 1996 Act.
7. On or about 6-12-2004, the dealer moved the Chief Justice of the Allahabad High Court under Section 11(6) for the appointment of an arbitrator as
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the Corporation had failed to act under the agreement. While the said proceedings were pending, on 28-12-2004, the Corporation appointed Shri B. Parihar, Senior Manager (LPG Engineering) of its U.P. State Office as the sole arbitrator.
9. Clause 29 of the agreement dated 1-11- 1998 provides as under:
"29. Any dispute or difference of any nature whatsoever or regarding any right, liability, act, omission on account of any of the parties hereto arising out or in relation to this agreement shall be referred to the sole arbitration of the Director (Marketing) of the Corporation, or of some officer of the Corporation who may be nominated by the Director (Marketing). It is known to the parties to the agreement that the arbitrator so appointed is a shareholder and employee of the Corporation. In the event of the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the Director (Marketing) as aforesaid at the time of such transfer, vacation of office or inability to act, shall designate another person to act as arbitrator in accordance with the terms of the agreement. Such person shall be entitled to proceed with the reference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation as aforesaid shall act as arbitrator hereunder. The award of the arbitrator so appointed shall be final conclusive and binding on all parties to the agreement, subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification of or
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re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause.
The award shall be made in writing within six months after entering upon the reference or within such extended time not exceeding further four months as the sole arbitrator shall by a writing under his own hands appoint."
11. Sub-sections (3), (4) and (5) of Section 11 have no application in the present case as the parties have agreed on a procedure for appointing the arbitrator in Clause 29. Sub-section (2) provides that subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub-section (6) makes provision for making an application to the Chief Justice concerned for appointment of an arbitrator in three circumstances: (a) a party fails to act as required under the agreed 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. If one of the three circumstances is satisfied, the Chief Justice may exercise the jurisdiction vested in him under Section 11(6) and appoint the arbitrator. In the present case, the dealer moved the Chief Justice of the Allahabad High Court under Section 11(6)(a) for the appointment of an arbitrator as the
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CMP No. 100003 of 2021Corporation failed to act as required under Clause
29.
12. The three basic facts are not in dispute, namely, (i) on 9-8-2004, the dealer called upon the Corporation by a written notice to appoint an arbitrator in accordance with the terms of Clause 29 of the agreement; (ii) the dealer made an application under Section 11(6) for appointment of the arbitrator on 6-12-2004; and (iii) the Corporation appointed the sole arbitrator on 28-12-2004 after the application under Section 11(6) was already made by the dealer.
13. On behalf of the appellant, Mr K.K. Venugopal, learned Senior Counsel, relied heavily upon the decisions of this Court: (i) Datar Switchgears [Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151] , and (ii) Punj Lloyd [Punj Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638] and submitted that the learned Chief Justice erred in holding that there was no reason to appoint any fresh arbitrator since the arbitrator has been appointed by the Corporation.
14. Mr Abhinav Vashishta, learned Senior Counsel for the respondents, on the other hand, relied upon a decision of this Court in Northern Railway Admn. [Northern Railway Admn., Ministry of Railway v. Patel Engg. Co. Ltd., (2008) 10 SCC 240]
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CMP No. 100003 of 2021and submitted that while considering application under Section 11(6) for appointment of the arbitrator, the Court must keep in view twin requirements of Section 11(8) and, seen thus, the view of the learned Chief Justice in the impugned order does not call for any interference.
15. In Datar Switchgears [Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151] (SCC p. 158, para 19), a two-Judge Bench of this Court considered the scheme of Section 11, noted the distinguishing features between Section 11(5) and Section 11(6) and then considered the question whether in a case falling under Section 11(6), the opposite party cannot appoint an arbitrator after the expiry of thirty days from the date of demand. This Court held that in cases arising under Section 11(6), if the opposite party has not made an appointment within thirty days of the demand, the right to make appointment is not forfeited but continues, but such an appointment has to be made before the first party makes application under Section 11 seeking appointment of an arbitrator. If no appointment has been made by the opposite party till application under Section 11(6) has been made, the right of the opposite party to make appointment ceases and is forfeited.
16. In Punj Lloyd [Punj Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638] (SCC pp. 639-40, para
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CMP No. 100003 of 20213), the agreement entered into between the parties contained arbitration clause. The disputes and differences arose between the parties. Punj Lloyd (the appellant) served a notice on Petronet (the respondent) demanding appointment of an arbitrator and reference of disputes to him. Petronet failed to act. On expiry of thirty days, Punj Lloyd moved the Chief Justice of the High Court for appointment of the arbitrator under Section 11(6). Petronet had not made appointment till the date of moving the application. The designate Judge refused to appoint the arbitrator holding that the remedy available to it was to move in accordance with the agreement. Aggrieved by the said order, a writ petition was filed which was dismissed and the matter reached this Court. A three-Judge Bench of this Court referred to Datar Switchgears [Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151] and held that the matter was covered squarely by that judgment and the view taken by the designate Judge in dealing with the application under Section 11(6) and the Division Bench was not right. This Court restored the application under Section 11(6) before the Chief Justice of the High Court for fresh consideration and appointment of the arbitrator in accordance with Section 11(6).
17. We are in full agreement with the legal position stated by this Court in Datar Switchgears
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CMP No. 100003 of 2021[Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151] which has also been followed in Punj Lloyd [Punj Lloyd Ltd. v. Petronet MHB Ltd., (2006) 2 SCC 638] .
18. Section 11(8) provides that Chief Justice or the designated person or institution, in appointing an arbitrator, shall have due regard to two aspects: (a) qualifications required of the arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. In Northern Railway Admn. [Northern Railway Admn., Ministry of Railway v. Patel Engg. Co. Ltd., (2008) 10 SCC 240] , a three-Judge Bench of this Court considered the scheme of Section 11. Insofar as Section 11(8) is concerned, this Court stated that the appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements mentioned therein have to be kept in view.
19. If we apply the legal position exposited by this Court in Datar Switchgears [Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151] to the admitted facts, it will be seen that the Corporation has forfeited its right to appoint the arbitrator. It is so for the reason that on 9-8-2004, the dealer called upon the Corporation to appoint the arbitrator in
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CMP No. 100003 of 2021accordance with the terms of Clause 29 of the agreement but that was not done till the dealer had made application under Section 11(6) to the Chief Justice of the Allahabad High Court for appointment of the arbitrator. The appointment was made by the Corporation only during the pendency of the proceedings under Section 11(6). Such appointment by the Corporation after forfeiture of its right is of no consequence and has not disentitled the dealer to seek appointment of the arbitrator by the Chief Justice under Section 11(6). We answer the above questions accordingly.
22. We are afraid that what has been stated above has no application to the present fact situation. In Newton Engg. [Newton Engg. & Chemicals Ltd. v. Indian Oil Corpn. Ltd., (2013) 4 SCC 44] , this Court was not concerned with the question of forfeiture of right of the Corporation for appointment of an arbitrator. No such argument was raised in that case. The question raised in Newton Engg. [Newton Engg. & Chemicals Ltd. v. Indian Oil Corpn. Ltd., (2013) 4 SCC 44] was entirely different. In the present case, the Corporation has failed to act as required under the procedure agreed upon by the parties in Clause 29 and despite the demand by the dealer to appoint the arbitrator, the Corporation did not make appointment until the application was made under Section 11(6). Thus, the Corporation
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CMP No. 100003 of 2021has forfeited its right of appointment of an arbitrator. In this view of the matter, the Chief Justice ought to have exercised his jurisdiction under Section 11(6) in the matter for appointment of an arbitrator appropriately. The appointment of the arbitrator by the Corporation during the pendency of the proceedings under Section 11(6) was of no consequence."
13. In its recent judgment in Durga Welding Works' case supra, in relation to a claim by a Contractor against the Indian Railways, the Apex Court restated the same principle and held as under:
"2. The instant appeal has been filed assailing the order dated 26th July, 2019 declining to appoint an Arbitrator in exercise of its power under Section 11(6) of the Arbitration and Conciliation Act, 1996(hereinafter being referred to as "the Act").
3. The seminal facts not in dispute are that the tender of the appellant was accepted and the same was communicated by letter dated 30th November, 2006 in reference to which a contract agreement was executed between the parties containing clauses 63 and 64 of the general conditions of contract containing the clause of arbitration for settlement of claims and/or disputes between the parties. Since
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there were claims which could not be settled, the appellant served a legal notice dated 3rd August, 2009 for appointment of an Arbitrator and for settlement of claims. Although, there was no express reference made of clauses 63 and 64 in the notice, but the pith and substance of the notice dated 3rd August, 2009 was for settlement of disputes through the process of arbitration in terms of the clause of arbitration under General conditions of agreement which is a part of the contract agreement executed between the parties.
4. It is not disputed that the notice dated 3rd August, 2009 was duly served upon the respondents. It is alleged that since the respondents failed to appoint an arbitrator pursuant to notice dated 3rd August 2009, Arbitration Petition(ARBP No. 61 of 2009) came to be filed on 23rd October, 2009 in the High Court of Orissa for appointment of an Arbitrator under Section 11(6) of the Act.
5. It reveals from the record that just after filing of the arbitration petition, the appellant has completely forgotten of taking action in furtherance thereto and it was never in notice of the respondents of such petition being filed since no notice was served at any stage.
6. In the meanwhile, the respondents vide letter dated 28th January, 2010, in response to the
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letter of the appellant dated 3rd August, 2009 asked the appellant to select two names from a panel of four persons.
7. It is alleged that immediately thereafter, on 17th February 2010, Miscellaneous Case No. 4 of 2010 was filed in Arbitration Petition No. 61 of 2009 seeking an order restraining the respondents from appointing an Arbitrator and that application too remained pending and no action was taken up by the appellant to pursue either the Arbitration Petition No. 61 of 2009 or the Miscellaneous Case No. 4 of 2010 before the High Court.
8. In the meanwhile, by letter dated 28th August 2010, two officers from the panel suggested by the respondents were selected by the appellant and in furtherance thereto, the respondents constituted an Arbitration Tribunal by letter dated 24th September, 2010. The appellant thereafter appeared before the Arbitral Tribunal on 25th October, 2010 and preferred statement of claim. The respondents also submitted their statement of defence on 15th November, 2010.
9. The appellant thereafter appeared before the Arbitral Tribunal on 27th December, 2011 and submitted an application that the Tribunal has not been nominated within the stipulated time and hence, the constitution of the Arbitral Tribunal is not
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CMP No. 100003 of 2021valid and further submitted that the Tribunal should not proceed with the arbitration proceedings. The fact still remains that the arbitration petition filed by the appellant on 23rd October, 2009 has not seen the light of the day except the fact that it was filed in the Registry of the High Court.
10. Since the Arbitral Tribunal was constituted, with consent of the appellant, the Tribunal proceeded with the arbitration proceedings and since the appellant failed to participate despite the opportunity being afforded, ex-parte award came to be passed on 21stJune, 2013 rejecting the claim of the appellant. The fact is that finally in the arbitration petition filed by the appellant, notices were issued to the respondents by the High Court in the year 2016, almost 3 years after passing of the ex-parte award dated 21st June, 2013. The High Court, taking note of such peculiar facts and circumstances, dismissed the arbitration petition by an Order dated 26th July, 2019 with liberty to the appellant to submit its objections under Section 34 or 37 of the Act, if so advised.
11. We have heard learned counsel for the parties and with their assistance perused the material available on record.
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CMP No. 100003 of 202112. The exposition of legal principles is indeed well settled by this Court in Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr. followed in Punj Lloyd Ltd. Vs. Petronet MHB Ltd.2 that once an application under Section 11(6) of the Act has been filed for appointment of an Arbitrator before the High Court, the respondents forfeited their right to appoint an Arbitrator and the 1) 2000(8) SCC 151 2) 2006(2) SCC 638 High Court alone holds jurisdiction to appoint an Arbitrator in exercise of power under Section 11(6) of the Act. Indisputedly, the appointment of an Arbitrator was made by the respondents after arbitration petition was filed by the appellant under Section 11(6) of the Act in the Registry of the High Court on 23rd October, 2009.
13. This Court cannot be oblivious of the peculiar facts and circumstances brought to our notice that after filing of an arbitration petition on 23rd October 2009 in the Registry of the High Court, the appellant completely slept over the matter and the respondents were never served of any notice of the Arbitration Petition (ARBP No. 61 of 2009) filed before the High Court of Orissa. At the given time, when the respondents called upon the appellant to suggest and select two names out of the panel of four for constitution of the Arbitral Tribunal, the
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CMP No. 100003 of 2021appellant vide letter dated 28th August, 2010 selected two officers from the panel suggested by the respondents. Pursuant thereto, the Arbitral Tribunal was constituted by the respondents vide letter dated 24th September, 2010 and the appellant thereafter appeared before the Arbitral Tribunal on 25th October, 2010 and submitted his statement of claim and in furtherance, statement of defence was submitted by the respondents.
14. The fact still remains that except the letter being once sent by the appellant on 27th December, 2011 informing of the arbitration petition being filed under Section 11(6) of the Act before the High Court, no steps were taken thereafter to pursue his arbitration application and since the appellant had not participated before the Arbitral Tribunal after filing of the statement of claim, ex-parte award came to be passed by the Arbitral Tribunal on 21st June, 2013. It may be noticed that notices were issued for the first time by the High Court of the arbitration petition filed by the appellant in the year 2016 almost 3 years after passing of the ex-parte award dated 21st June, 2013.
15. In the given facts and circumstances, the High Court was not inclined to exercise its jurisdiction under Section 11(6) of the Act for appointment of an Arbitrator and dismissed the
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CMP No. 100003 of 2021petition by an Order dated 26th July, 2019 with liberty to the appellant to submit objections against the ex-parte award dated 21st June, 2013 under Section 34 or 37 of the Act, if so advised.
16. In our considered view, so far as the question of law is concerned, certainly being settled that after the application has been filed for appointment of an Arbitrator under Section 11(6) of the Act, before the High Court the respondents forfeited their right to appoint an Arbitrator under the clause of arbitration thereafter but from the narration of facts which has been noticed by us, we are of the view that no error was committed by the High Court in dismissing the petition filed under Section 11(6) of the Act for appointment of an Arbitrator by an Order dated 26th July, 2019.
17. Consequently, the appeal fails and accordingly dismissed.
18. Pending application(s), if any, stand disposed of."
14. As is clear from the said decision, the Apex Court applied and reiterated the aforesaid settled legal principle/question of law with regard to forfeiture and held that the Railways had forfeited their right to appoint an arbitrator and/or insist upon following the agreed appointment procedure
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CMP No. 100003 of 2021to constitute an arbitral tribunal as contemplated under Clause 64 of the GCC; however, in the peculiar / special facts and circumstances obtaining in the said case, the Apex Court rejected the plea of the petitioner.
15. In the instant case, as rightly contended by the learned counsel for the petitioner, it is an undisputed fact that the petitioner got issued an arbitration notice dated 17.08.2020 to the respondents calling upon them to constitute an arbitral tribunal in terms of the appointment procedure agreed upon between the parties; despite having received the said arbitration notice on 20.08.2020, the respondents failed to act as required under the said appointment procedure agreed upon in Clause No.64 of the GCC and did not appoint an arbitrator even after the present petition was preferred by the petitioner and consequently, the respondents clearly forfeited their right not only to appoint arbitrators as per Clause No.64 but also forfeited their right to insist upon following the appointment procedure under the said Clause No.64 of the GCC and constitute an arbitral tribunal.
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CMP No. 100003 of 202116. Under these circumstances, in the light of the law laid down by the Apex Court as stated supra, in particular, its decision Durga Welding Works case supra, in relation to a claim by a Contractor against the Indian Railways which was rendered under identical circumstances qua Clause No.64 of the GCC, I am of the considered opinion that having failed to act as required under the agreed appointment procedure in terms of Clause No.64 of the GCC and having not appointed an arbitrator despite having received the arbitration notice dated 20.08.2020 and the present petition under Section 11 having been filed before this Court, the respondents have forfeited their right to appoint an arbitrator and/or insist upon constitution of an arbitral tribunal in terms of the agreed appointment procedure under Clause No.64 of the GCC.
Accordingly, the respondents having forfeited their right as stated supra, it would be just and appropriate that this Court takes necessary steps/measures to appoint an arbitrator and/or constitute an arbitral tribunal without reference to the agreed appointment procedure under Clause No.64 of the GCC and the contention of the respondents in this regard cannot be accepted.
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CMP No. 100003 of 202117. Insofar as the contention urged by the respondents with regard to alleged issuance of an alleged 'no claim' certificate by the petitioner is concerned, the said contention having been denied / disputed by the petitioner gives rise to a disputed question / issue which, in the facts of the instant case is not capable of being adjudicated upon at the referral stage and the same would necessarily have to be decided by the arbitral tribunal as held by the Apex Court in Vidya Drolia's case and Nortel's case supra and consequently, even this contention of the respondents cannot be accepted.
18. Insofar as the contention of the respondents that the petitioner had not complied with the requirement of issuing an arbitration notice within a period of 90 days from the date of the final bill dated 09.02.2019 as required under Clause No.64(1)(iv) of the GCC and had consequently waived its claim against the respondents is concerned, a perusal of the said clause will indicate that the said period of 90 days would commence only from the date, on which, petitioner receives intimation in writing from the respondents that the final bill was ready for payment; in the instant case, respondents have not placed any material to establish that they had intimated the
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CMP No. 100003 of 2021petitioner in writing that the final bill was ready for payment more than 90 days prior to issuance of the arbitration notice dated 17.08.2020 and consequently, Clause No.64(1)(iv) of the GCC would not be applicable to the case on hand and it cannot be said that the petitioner had waived its claim against the respondents; at any rate, in view of my finding above that the respondents had forfeited their right not only to appoint an arbitrator but that the respondents had also forfeited their right to insist upon the appointment procedure under Clause 64 to be followed, even this contention of the respondents cannot be accepted.
19. Insofar as the decisions relied upon by the learned counsel for the respondents are concerned, the decision in Central Organisation for Railway Electrification's case, which was rendered in a situation where the respondents appointed an arbitrator as per the procedure under Clause-64 of the GCC prior to the petitioner therein preferring a petition/application under Section 11 of the said Act of 1996 is clearly not applicable to the facts of the instant case, where no such appointment was made by the respondents even after the said application/petition was filed; further, the said judgment
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CMP No. 100003 of 2021has been distinguished by a Co-ordinate Bench of this Court in Gounder Infratech's case supra, wherein this Court appointed a Sole Arbitrator without reference to Clause 64 of the GCC; so also, the decision of the Apex Court in Parmar Construction's case supra is also distinguishable on facts and the same is not applicable to the peculiar/special facts and circumstances obtaining in the instant case and as such, even this contention urged by the respondents cannot be accepted.
20. In view of the aforesaid facts and circumstances, though several contentions have been urged by both sides in support of their respective claims, without expressing any opinion on the merits / demerits of the rival contentions, I deem it just and appropriate to allow this petition by referring the dispute between the parties to arbitration with the consent of both sides by appointing Hon'ble Justice A.V.Chandrashekar, Former Judge, High Court of Karnataka, to act as the sole Arbitrator to resolve the dispute between the parties under the provisions of the Arbitration and Conciliation Act, 1996, as per the Rules governing the Arbitration and Conciliation Centre (Domestic & International) at Bengaluru.
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CMP No. 100003 of 202121. In the result, I pass the following:
ORDER
(i) Petition is hereby allowed.
(ii) Hon'ble Justice A.V. Chandrashekar, Former Judge, High Court of Karnataka, is hereby appointed as the sole Arbitrator to resolve the dispute between the parties as per the Rules governing the Arbitration and Conciliation Centre (Domestic & International) at Bengaluru.
(iii) All rival claims, contentions, etc., of both parties including contentions relating to maintainability, arbitrability, jurisdiction, limitation, stamp duty, etc., are left/kept open to be decided by the Arbitral Tribunal and no opinion is expressed on the same.
(iv) A copy of this order be sent forthwith to the Arbitration and Conciliation Centre (Domestic & International), Khanija Bhavan, Bengaluru, for proceeding further and also to Hon'ble Justice A.V. Chandrashekar, Former Judge, High Court of Karnataka, to the address available with the said Centre.
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CMP No. 100003 of 2021(v) Registry is directed to return all original documents produced by any of the parties after obtaining Photostat copies of the same.
Sd/-
JUDGE CLK / SV List No.: 1 Sl No.: 148