Research › Search › Judgment

Andhra High Court · body

2005 DIGILAW 202 (AP)

YASHWITHA CONSTRUCTIONS (P) Ltd. v. SIMPLEX CONCRETE PILS (INDIA) Ltd.

2005-03-04

DEVENDER GUPTA

body2005
( 1 ) BY this application filed under Sec. 11 (5) read with Section 15 (2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") on 8-9-2004, prayer has been made to appoint a substitute arbitrator to resolve the disputes between the applicant and the respondent. ( 2 ) THE facts in brief are that the bid of the joint venture formed by respondent/company for the work of rehabilitation and upgrading of existing two-lane road to four/six-lane divided carriage way configuration of Kavali to Ongole, KM 222 to 291 of National highway No. 5 in Andhra Pradesh was accepted and the work order dated 6-7-2001 was issued. The work was scheduled to be completed in thirty-two calendar months. The applicant is a private limited company and was given sub-contract of certain portions of the road work by the respondent. This agreement entered into on 28-5-2002 has an arbitration clause 21, which reads as under:"in the event of any difference or dispute arising out of or in connection with this work order (including interpretation of the terms thereof), the same shall be referred to arbitration. The arbitration proceedings shall be conducted by a single arbitrator appointed by the Managing Director of simplex Concrete Piles (India) Limited and the award/decision of such arbitrator shall be final and binding upon both the parties. The venue of the arbitration shall be at Calcutta. However, you will not stop the work during the pendency of the proceedings and shall ensure that such work is proceeded un-interruptedly. " ( 3 ) DURING continuance of the work disputes arose between the parties. The applicant filed O. S. No. 72 of 2002 on the file of Senior Civil Judge, Kandukur seeking recovery of amount. I. A. No. 1503 of 2002 was filed in the said suit and on 11 -10-2002, the application was decided. The Senior Civil judge, Kandukur referred the disputes for settlement by invoking arbitration clause. Pursuant thereto, on 18-10-2002, sri P. R. Dhar was appointed as the sole arbitrator to enter upon reference and proceed to make his award. Applicant s case is that it was not aware of the fact that sri P. R. Dhar was one of the Directors of the respondent/company. Pursuant thereto, on 18-10-2002, sri P. R. Dhar was appointed as the sole arbitrator to enter upon reference and proceed to make his award. Applicant s case is that it was not aware of the fact that sri P. R. Dhar was one of the Directors of the respondent/company. On coming to know that Sri P. R. Dhar was one of the Directors of the respondent/company, an application was filed under Sections 12 and 13 of the Act challenging the appointment on the ground that the applicant has grave doubts regarding independence and impartiality of the arbitrator. Application was resisted by the respondent and in the meanwhile there was no progress in the arbitration and ultimately the applicant on 6-9-2004 received a communication dated 25-8-2004 from sri P. R. Dhar informing the applicant that he is resigning as arbitrator because of his ill- health. The case of the respondent is that the sole arbitrator fell sick on 11 -2-2004 and underwent major surgery and resigned due to ill-health on 25-8-2004. ( 4 ) THE case of the applicant is that on receipt of the intimation from the arbitrator on 6-9-2004 that he is resigning as an arbitrator due to ill-health, the applicant realizing that a substitute arbitrator has to be appointed as comtemplated under sub-section (2) of section 15 of the Act and Clause 21 of the arbitration agreement does not contemplate a situation of this nature and does not provide for appointment of a substitute arbitrator since no power is reserved with the respondent for appointing a substitute and there was possibility of the respondent appointing a person of its own choice, this application was filed praying appointment of an arbitrator. The applicant further alleged that the applicant apprehends that the single arbitrator was forced to resign by the respondent in order to begin the arbitration proceedings afresh and in order to enable the respondent to make changes in the claim statement and rejoinder, in view of glaring discrepancies pointed out in the counterclaim. The applicant further alleged that the applicant apprehends that the single arbitrator was forced to resign by the respondent in order to begin the arbitration proceedings afresh and in order to enable the respondent to make changes in the claim statement and rejoinder, in view of glaring discrepancies pointed out in the counterclaim. ( 5 ) AFTER notice the respondent filed counter affidavit wherein it has been stated that after resignation of the sole arbitrator, the respondent took prompt steps by requesting the Managing Director of the company to appoint a sole arbitrator in place of Sri P. R. Dhar and accordingly the managing Director by order dated 8-9-2004 appointed Sri S. K. Biswas as the sole arbitrator in accordance with Clause 21 of the agreement. Intimation of the appointment was sent to the applicant, which was not served and in the meanwhile the sole arbitrator intimated the parties of the first sitting. ( 6 ) THE applicant in rejoinder has questioned the action of the respondent in making appointment of the sole arbitrator and has reiterated its prayer for appointment of a fresh arbitrator under Section 11 (6) of the Act by the Court. ( 7 ) PARTIES have been heard. Learned counsel for the applicant has relied upon three decisions in support of his submission that since the arbitration clause does not provide for the eventuality of appointing a substitute arbitrator in the event of occurrence of a vacancy, the power has to be exercised by the Court under Sec. 11 (6) of the Act of appointing a substitute arbitrator. ( 8 ) IN M/s. Deepak Galvanising and engineering Industries Pvt. Ltd. v. Govt. of lndia, a learned single Judge of this Court held that the mandate of the named arbitrator should be deemed to have been terminated when he failed to act without undue delay an application requesting the chief Justice of the High Court for appointment of arbitrator under Sec. 11 (6) of the Act was maintainable. The submission of the respondents in the said case that the court cannot appoint any arbitrator other than the one given in the arbitration clause was turned down. The submission of the respondents in the said case that the court cannot appoint any arbitrator other than the one given in the arbitration clause was turned down. ( 9 ) LEARNED single Judge of Bombay High court in Satya Kailashchandra Sahu v. Vidarbha Distillers, Nagpuf2 also took the same view that the mandate of the arbitrator shall terminate if he withdraws from office or parties agree to terminate his appointment and where mandate of arbitrator terminates a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator for being replaced. Therefore, the Chief Justice is required to take necessary measure for appointment of arbitrator, unless the agreement on the appointment procedure provides other means for securing appointment. Section 11 provides for exhaustive measures for appointment of arbitrator, in case there is no agreement between the parties. ( 10 ) SAME view was taken by a learned single Judge of Delhi High Court in Aravali leasing Ltd. v. Unicol Bottlers Ltd. holding:"turning to the last objection referred to above, copies of the lease agreements in question are placed on records. They are completely silent on the point of supply of vacancy of the arbitrator. If the agreements are silent as regards supplying the vacancy, the law presumes that the party intended to supply the vacancy. I am fortified in mine view by a decision of Prabhat general Agencies etc. v. UOI and another, etc. 1971 (2) SCR 564 : 1971 air (SC) 2298: 1971 UJ 20 : 1971 (1) scc 79 which was quoted with approval in a later decision in State of west Bengal v. National Buildiders 1994 (1) SCC 235 AIR 1994 SC 200 : 1994 (A) Arb. LR 5: 1993 (6) JT 144 : 1993 (4) SCALE 187 : 1994 (1) UJ 81 : 1993 (3) CCC 612 by the Apex Court. Further, the language of the lease agreements in question do not show that the parties intended not to supply the vacancy in these cases. On sh. Umesh Khaitan and Anil Sharma s refusing to act as arbitrator/alternate arbitrator the arbitration clause ceases to operate entitling the Court to appoint another arbitrator (See; State of West bengal v. National Builders (1994) 1 scc 235 : AIR 1994 SC 200 : 1994 (1) arb. On sh. Umesh Khaitan and Anil Sharma s refusing to act as arbitrator/alternate arbitrator the arbitration clause ceases to operate entitling the Court to appoint another arbitrator (See; State of West bengal v. National Builders (1994) 1 scc 235 : AIR 1994 SC 200 : 1994 (1) arb. LR 5: 1993 (6) JT 144 : 1993 (4) scale 187 : 1994 (1) UJ 81 : 1993 (3) ccc 612. " ( 11 ) THE decision relied upon by the learned counsel for the applicant does hold that where the mandate of the arbitrator terminates a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced and when the arbitration clause in the agreement does not contemplate such a situation, resort has to be made to sub-section (6) of Section 11 of the Act and the Chief Justice is required to take necessary measures for appointment of arbitrator. ( 12 ) LEARNED counsel for the respondent, has referred to a decision of the Supreme court reported in P. G. Agencies v. Union of india. While interpreting the provisions of section 8 (1) (b) of the Arbitration Act, 1940, it was held that if the agreement is silent as regards supply of vacancy, law presumes that the parties intended to supply vacancy. In order to take the case out of Section 8 (1) (b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy and where in a an agreement the judicial commissioner of the State of Himachal pradesh was appointed as arbitrator by designation and not by name, this fact itself did not afford any indication that the agreement intended not to supply the vacancy if the Judicial Commissioner refuses to act or becomes incapable of acting. This decision renders no help to the proposition before me. ( 13 ) ANOTHER decision relief upon is of a learned single Judge of Delhi High Court reported in M/s. V. K. Construction Works ltd. , v. Army Welfare Housing Organisation wherein also relying upon the provisions of section 8 (1) (b) of the Arbitration Act, 1940, learned single Judge interpreted the arbitration clause that the parties had agreed the vacancy to be supplied by the Chairman, army Welfare Housing Organisatioin. , v. Army Welfare Housing Organisation wherein also relying upon the provisions of section 8 (1) (b) of the Arbitration Act, 1940, learned single Judge interpreted the arbitration clause that the parties had agreed the vacancy to be supplied by the Chairman, army Welfare Housing Organisatioin. ( 14 ) THIRD decision relied upon is that of the Supreme Court reported in Konkan railway Corporation Ltd. , v. Rani construction Pvt. Ltd. . The point arising for consideration has not been specifically dealt with in the said decision. ( 15 ) SECTION 15 of the Act deals with termination of mandate and substitution of arbitrator and sub-section (1) of Section 15 says that in addition to the circumstances referred to in Section 13 or 14 the mandate of the arbitrator shall terminate where he withdraws from office for any reason or by or pursuant to the agreement of the parties and sub-section (2) of Section 15 says that where mandate of the arbitrator terminates a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced. ( 16 ) ADMITTEDLY, the arbitration clause nowhere contemplates any other means for securing appointment of substitute arbitrator. It contemplates a situation of appointing an arbitrator and it has authorized the arbitration proceedings to be conducted by a single arbitrator appointed by the Managing director of Simplex Concrete Piles (India) limited. The said arbitrator appointed by the managing Director of Simplex Concrete piles (India) Limited has resigned. Now the question is whether the Managing Director of simplex Concrete Piles (India) Limited gets power to appoint a substitute arbitrator in the event of termination of mandate of the arbitrator. Sub-section (2) of Section 15 of the Act says that a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of arbitrator being replaced. The rules, which were applicable, admittedly are nothing but clause 21 of the Agreement, which authorizes the Managing Director to appoint an arbitrator. It is an agreement entered into between the parties and has to be followed and appointment has to be in consonance thereof. Section 15 of the Act is fully applicable to the facts of this case. The arbitrator had already been appointed by the appointing authority as on the day when application was filed. It is an agreement entered into between the parties and has to be followed and appointment has to be in consonance thereof. Section 15 of the Act is fully applicable to the facts of this case. The arbitrator had already been appointed by the appointing authority as on the day when application was filed. The said appointment is strictly in consonance with the terms of agreement and is as per provisions of section 15 of the Act. In that view of the matter, nothing survives in this application, which stands dismissed.