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2004 DIGILAW 102 (JK)

B. v. Sharma VS Housing Board, J&K

2004-04-12

Y.P.NARGOTRA

body2004
Through this petition U/S 8, read with sec. 11 of the Arbitration and Conciliation Act, 1997, (Act hereafter), the petitioner is seeking appointment of an arbitrator for adjudicating upon the disputes alleged to have arisen between the parties. The case projected by the petitioner in this petition is that the petitioner is an Architect by profession and works under the name and style of B.V. Sharma & Associates. Respondent No.2, Sh. K. K. Mattoo, Managing Director of J&K Housing Board solicited the services and expertise of the petitioner as a consultant for preparing the concept plan and detailed drawings of the re-development scheme of the existing Government quarter A, B, and C type buildings located in Gandhi Nagar Jammu by his letter No. HB/PO/1753-54 dated 25.6.1994. The petitioner accepted the engagement and prepared the conceptual drawings of layout of perspective view plans of duplex type A, B and C and single rooms flats and on his part vide his letter dated 5.7.1994 spelt out the professional fee rate for his consultancy service to the said project. In the said letter he also mentioned that in case of any dispute or difference arising between the parties same shall be referred for arbitration to the Council of Architecture for final decision. Respondent No.2 on its part vide letter dated 9.7.1994 addressed to the petitioner accepted to be governed by the terms and conditions as contained in the memorandum of understanding furnished by the, petitioner, governing his professional engagement for a project of the J.D.A. The petitioner submitted complete drawings of the conceptual designs alongwith his fee-bills for an amount of Rs.1,2,97,940 after deducting the paid first payment of Rs.70000 payment was not made Parties exchanged correspondence in this behalf, however, it appears that alteration was decided to be made in the originally conceived re-development scheme of the Government quarters located at A,B and C type buildings. The petition was required to submit fresh conceptual drawings of individual blocks and layout plan for construction of 220 numbers of four storied flats over 44 kanals of land after demolition of existing C type Govt. quarters in Gandhi Nagar which was also submitted accordingly by the petitioner to the respondents. The petitioner submitted bill of Rs.9.00 lacs as consultancy fee up to the conceptual drawing stage. Instead of making payment, the respondent No. 2 started contemplating appointment of another Architect in place of the petitioner. quarters in Gandhi Nagar which was also submitted accordingly by the petitioner to the respondents. The petitioner submitted bill of Rs.9.00 lacs as consultancy fee up to the conceptual drawing stage. Instead of making payment, the respondent No. 2 started contemplating appointment of another Architect in place of the petitioner. The petitioner filed a writ, petition in the High Court which came to be disposed of vide order dated 4.9.2001 directing the respondents to take such decision as may be deemed proper with regard to all the matters raised in the writ petition by the petitioner within a period of three months. In compliance to the directions issued by this court, respondent No.2 invited the petitioner to compete for limited competition on the alleged revised proposal for the proposed re-development scheme of Govt. quarters. The petitioner filed an application under section 9 before the Pr. District Judge Jammu seeking an interim direction for restraining the respondents from proceeding ahead with the alleged exercise in terms of invitation for limited competition for the said revised proposal of the project. The application however came to be dismissed by the learned District Judge vide his order dated 30.3.2002. The respondents also refuted their liability for any payment towards the petitioner. The petitioner therefore, issued a legal notice dated 23.3.2002 to the respondents for seeking a reference of the dispute for arbitration of Council of Architecture, a statutory body under the Architects, Act, New Delhi. Arbitrator was not appointed nor any reference was made so the petitioner has approached this Court under section 11 of the Act seeking appointment of arbitrator and reference of the disputes in accordance with the arbitration clause contained in his letter dated 5.7.1994. 2. The respondents were issued notices. Objections have been filed. In the objections application has been opposed mainly on two grounds; firstly that there is no arbitration agreement existing between the parties, therefore, no arbitrator can be appointed and secondly that there was no concluded contract between the parties, therefore, the respondents are not liable to make any payment to the petitioner. 3. I have heard the learned counsel for the parties and gone through the record thoroughly. 4. It is admitted case of the parties that the petitioner filed an application u/s 9 of the Act before the learned Pr. District Judge Jammu. It is also admitted that the learned Pr. 3. I have heard the learned counsel for the parties and gone through the record thoroughly. 4. It is admitted case of the parties that the petitioner filed an application u/s 9 of the Act before the learned Pr. District Judge Jammu. It is also admitted that the learned Pr. District Judge dismissed the application by holding that no arbitration agreement was in existence between the parties. It is also an admitted fact that the said order/judgment of the Pr. District Judge has not been challenged before any forum by the petitioner and as such the order has acquired finality. The preliminary question arising for determination is as to whether in the face of the finding of the Pr. District Judge that there was no arbitration agreement in existence of the parties an application under section 11 can be maintained? 5. The jurisdiction to make an order under section 11 of the Act can arise with Honble Chief Justice or his designate only where an arbitration agreement is shown by the parties to be in existence. Can this court being designate of the Honble Chief Justice hold that an arbitration agreement exists between the parties by overlooking the finding of fact returned by the Pr. District Judge while adjudicating upon an application under section 9 of the Act? Learned counsel for the petitioner has argued that the finding of the learned Pr. District Judge cannot operate as resjudicata because sec. 11 is an independent jurisdiction and therefore, a fresh finding can very well be returned on the existence of arbitration agreement. On the other hand the contention of learned counsel for the respondents is that the doctrine of resjudicata applies to the present proceedings because same have been returned by a court of competent jurisdiction. 6. I have considered the contentions raised by the learned counsel for the parties. In support of his contention learned counsel for the petitioner. Mr. Raina has relied upon AIR 2002 SC 778, M/S Konkan Rly.Corp. v. Rani Construction P. Ltd. and AIR 1981 SC 1621, Kirti Kumar vs Union of India. 6. I have considered the contentions raised by the learned counsel for the parties. In support of his contention learned counsel for the petitioner. Mr. Raina has relied upon AIR 2002 SC 778, M/S Konkan Rly.Corp. v. Rani Construction P. Ltd. and AIR 1981 SC 1621, Kirti Kumar vs Union of India. In AIR 2002 SC 778 Their Lordships have held as follows: -- "(E) Arbitration and Conciliation Act (26 of 1996) Ss.11,16-Arbitrator-Nomination by Chief Justice -- Before expiry of 30 days available to party to appoint arbitrator-such ground can be raised before arbitrator and can be decided by it- Arbitrators jurisdiction under s. 16-Not confined to width but also goes to root of its jurisdiction-In a given case the Chief justice or his designate may have nominated an arbitrator although the period of thirty, days had not expired. If so, the arbitratral tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the arbitral tribunal to rule on its jurisdiction. S.16 provides for this. It states that the arbitral tribunal may rule on its own jurisdiction. That the arbitral tribunal may rule "on any objection with respect to the existence or validity of the arbitration agreement" shows that the arbitral tribunals authority under S.16 is not confined to the width of its jurisdiction. There would therefore be no impediment in contending before the arbitral tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and that therefore it had no jurisdiction." In AIR 1981 SC 1621, Their Lordships held: -- "Apart from the case discussed above there is another ground on which the argument of Mr. Phadke for respondents must be rejected. The doctrine of finality of judgment or the principles of res judicata are founded on the basic principle that where a court of competent jurisdiction has decided an issue the same ought not allowed to be agitated again and again. Such a doctrine would be wholly inapplicable to cases where the two forums have separate and independent jurisdictions. The doctrine of finality of judgment or the principles of res judicata are founded on the basic principle that where a court of competent jurisdiction has decided an issue the same ought not allowed to be agitated again and again. Such a doctrine would be wholly inapplicable to cases where the two forums have separate and independent jurisdictions. In the instant case the High Court decided the petition of the detenu under Article 226 which was a discretionary jurisdiction whereas the jurisdiction to grant relief in a petition under Article 32 filed in the Supreme Court is guaranteed by the constitution and once the court finds that there has been a violation of Article 22(5) of the constitution then it has no discretion in the matter but is bound to grant the relief to the detenu by selling aside the order of detention. The doctrine of res judicata or the principles of finality of judgment cannot be allowed to whittle the down or override the express constitutional mandate to the Supreme Court enshrined in Art. 32 of the constitution." 7. On the strength of the above quoted observations of the Supreme court Mr. Raina argues that finding returned by the District Judge is not binding upon this Court for the reason that it is the plenary and independent jurisdiction of the Chief Justice or his designate to formulate an opinion on the existence of the arbitration agreement and if the arbitration agreement is found in existence then such authority is empowered to order for the appointment of the arbitrator in terms of the agreement. The other party who has not moved the court if intends to challenge the jurisdiction of the arbitrator it can do so only before the arbitrator who is competent to rule about his jurisdiction. According to Mr. Raina a District Judge while hearing an application under section 9 of the Arbitration Act possesses limited jurisdiction for deciding whether interim relief prayed for by the applicant should be granted or rejected. 8. The vital question arising for consideration is whether the court exercising jurisdiction u/s 9 of the Act is empowered to form an opinion with regard to the existence of the arbitration agreementÿ? and if yes whether such opinion is binding upon the Chief Justice or his designate who exercises jurisdiction vested under sec.11 of the Act? Section 9 provides:-- Section 9. -- 9. and if yes whether such opinion is binding upon the Chief Justice or his designate who exercises jurisdiction vested under sec.11 of the Act? Section 9 provides:-- Section 9. -- 9. Interim measure etc. by court -A party may before or during arbitral proceedings or at any time after making of the arbitral award but before it becomes decree of a court, apply to a court -- (i) For the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or (ii) For an interim measure of protection in respect of any of the following matters namely: -- (a) The preservation, interim custody or sale of any goods which are subject matter of the arbitration agreement; (b) Securing the amount in dispute in the arbitration". Section 9 substantially reproduces section 41 (b) read with second Schedule of Arbitration Act 1940 except for the two major changes. Under section 9 of 1997 Act an application can be made for interim relief before or during or even after making of the arbitral award but before its enforcement. It also widens the nature of interim relief that the party can pray for and empowers the court to grant such relief if it is just and convenient. It is a settled principle that the exercising its power to grant interim relief court must be satisfied (i) that the applicant has a prima facie right to the relief (ii) that the refusal to grant relief would result in irreparable injury and (iii) that balance of convenience was in favour of the applicant. 9. In my view prima facie case would include the applicant producing sufficient evidence to reasonably hold that there is a valid arbitration agreement between the parties. The opinion to be formulated about the existence of an arbitration agreement in my considered opinion has not to be conclusive but only has lo be a prima facie opinion for granting interim relief. Sec.16 of the Act provides: -- 16. The opinion to be formulated about the existence of an arbitration agreement in my considered opinion has not to be conclusive but only has lo be a prima facie opinion for granting interim relief. Sec.16 of the Act provides: -- 16. Competence of arbitral tribunal to rule on its jurisdiction (1) The arbitral tribunal may rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of the arbitration agreement and for that purpose: -- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other than of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause." It is manifest that section 16(1) empowers the arbitral tribunal to decide finally with respect to the existence or validity of the arbitration agreement subject to the right of appeal to the court under sub-sec.6. 10. Undisputedly the jurisdiction vested in the Chief Justice or his designate under section 11 is not an adjudicatory jurisdiction. What such authority has to do after receiving request of a party for appointment of an arbitrator? In AIR 2002 SC 778 Their Lordships of the Supreme court have observed: -- S.11 of the Act deals with the appointment of arbitrators. It provides that the parties are free to agree on a procedure for appointing an arbitrator or arbitrators. Sub-sections 3, 4 & 6 of S. 11 prescribe the events when a party may request the Chief Justice to nominate an arbitrator and the nomination shall be made by the Chief Justice or any person or institution designated by him. Under sub-sec.7 the decision of the Chief Justice or his designate is final. In nominating an arbitrator the Chief Justice or his designate must have regard to the qualifications required of the arbitrator in the agreement between the parties and to other considerations that will secure the nomination of an independent and impartial arbitrator. There is nothing in S. 11 that require the party other than the party making the request to be noticed. It docs not contemplate a response from that other party. There is nothing in S. 11 that require the party other than the party making the request to be noticed. It docs not contemplate a response from that other party. It does not contemplate a decision by the Chief Justice or his designate on any controversy that the other party may raise, even in regard to its failure to appoint an arbitrator within the period of thirty days. That the Chief Justice or his designate has to make the nomination of an arbitrator only if the period of thirty days is over does not lead to the conclusion that the decision to nominate is adjudicatory. In its request to the Chief Justice to make the appointment the party would aver that this period has passed and ordinarily correspondence between the parties would be annexed to bear this out. This is all that the Chief Justice or his designate has to see. That the Chief Justice or his designate has to take into account the qualifications required of the arbitrator by the agreement between the parties and other considerations likely to secure the nomination of and independent impartial arbitrator also cannot lead to the conclusion that the Chief Justice or his designate is required to perform an adjudicatory function. That the word "decision" is used in the matter of the request by a party to nominate an arbitrator does not of itself mean that an adjudicatory decision is contemplated." 11. From the above observations it clearly merges that the Chief Justice or his designate has not to adjudicate upon the question of existence, Validity or otherwise of the arbitration agreement. The order under sec. 11 of the Act can be passed without even pulling the opposite party on notice. From the nature of the jurisdiction vested in him it is clear in my considered opinion that only a prima facie opinion about the existence and validity of the arbitration agreement is required to be formulated. If prima facie it is held that there exist a valid arbitration agreement between the parties such opinion is not final and conclusive so as to curtail the right of the opposite party to challenge the existence or validity of an arbitration agreement before an arbitral tribunal. If prima facie it is held that there exist a valid arbitration agreement between the parties such opinion is not final and conclusive so as to curtail the right of the opposite party to challenge the existence or validity of an arbitration agreement before an arbitral tribunal. Therefore, the Chief Justice or his designate is not bound by the prima facie opinion of the court given/formulated while deciding an application under section 9 of the Act in respect of grant or refusal of the interim relief. 12. Having answered the questions formulated above I advert to the facts in issue in the present case. 13. The petitioner in response to letter No. HB/PO/753-54 dated 25-06-1994 wrote to the Managing Director J&K Housing Board Jammu that "all differences and dispute arising between client and Architect in any matter, connected with the agreement or in regard to the interpretation content places referred to Council of Architect for final decision." The Managing Director in his reply-dated 9-7-1999 by implication appears to have accepted to have been entered between the parties by exchange of letters within the ambit of section 7(4) of the Act. 14. Undisputedly the petitioner has by notice called upon the respondent to refer the disputes arising between the parties to the Arbitrator but the respondent has failed to do so within the statutory period. The petitioner of the petitioner therefore deserves to be allowed. 15. For the aforesaid reasons the petition of the petitioner is allowed and Council of Architecture New Delhi is appointed as Arbitrator for adjudicating upon the disputes, which have arisen between the parties. The Arbitrator shall enter upon the reference after notice to the parties and shall make its/his award in accordance with law. The Arbitrator shall be at liberty to assess his fees in accordance with rules, if any, governing the field.