Everonn Systems India Limited v. Directorate of Education
2007-12-11
ANIL KUMAR
body2007
DigiLaw.ai
JUDGMENT Anil Kumar, J. 1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of a sole arbitrator in terms of arbitration agreement between the parties as the disputes have arisen between the parties. 2. The petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of imparting computer education, maintenance and supply of computer hardware, development of computer software etc. The petition has been filed by Mr. Chandrababu, General Manager of the petitioner company, who has been authorized by a resolution dated 24th July, 2007 passed by the Board of Directors, to institute this petition. 3. The contention of the petitioner is that a Notice Inviting Tender (NIT) bearing No. F.DE-45/21/CEP-V/2004 was issued by the respondent for computer education project, "CEP-V", in 267 Government/Government aided schools in the NCT of Delhi and the petitioner was selected as a successful bidder and a letter of acceptance dated 30th January, 2006 was issued to the petitioner along with a draft agreement for execution. However, as the draft agreement was at variance with the terms and conditions of the NIT thereforee, a clarification was sought by the petitioner by its letter dated 31st January, 2006. Thereafter an agreement dated 20th February, 2006 was entered between the parties formally incorporating the scope of project and the various terms and conditions governing the parties. The agreement was valid till 27th March, 2010 and that the project implementation was to be completed within 30 days from the date of the signing of the agreement. According to the petitioner there was a delay in the implementation of the project on account of inactions attributable to the respondents. The petitioner has detailed the reasons for non-implementation of the project in para 13 of the petition. 4. Despite hindrances the petitioner went ahead with the implementation of the project and in a meeting held on 14th September, 2006 the petitioner representing the problems faced in implementing the project sought for release of 15% of the initial payments in terms of the contract between the parties, however, the same was not released by the respondents. Thereafter several correspondences were sent by the petitioner to the respondent highlighting the issues relating to the project however the same have remained unresolved and unaddressed. 5.
Thereafter several correspondences were sent by the petitioner to the respondent highlighting the issues relating to the project however the same have remained unresolved and unaddressed. 5. Thereafter a total bill of Rs 10.05 crores was raised by the petitioner uptill March 2007, against which an amount of Rs 3.5 crores was only been received between 27th October, 2006 to 18th May, 2007. The petitioner stated that the respondents are contemplating to levy penalty on delay in the implementation of the project for which the respondent is solely responsible. The petitioner pleaded that they were always willing, ready and prepared to act, in furtherance of the agreement and had also taken irretrievable steps by mobilizing resources to complete the project and that the respondents are in breach of their obligation under the agreement. According to the petitioner it has pecuniary claim inter-alia for outstanding payments, unwarranted penalties and damages. Consequently disputes have arisen between the parties. According to the petitioner Clause 16 of the agreement dated 20th February 2006 entered into between the petitioner and the respondents contained the Arbitration agreement. Clause 16 of the agreement containing the arbitration agreement is as under: 16: Any dispute/difference arising out of or relating to this agreement including the interpretations of the terms and conditions will be resolved through joint discussion. However, if the dispute is not resolved through joint discussion then the matter will be referred to the arbitrator appointed by the Lieutenant Governor Delhi. Further, competent court of Delhi alone shall have jurisdiction over the same. 6. Thereafter, the petitioner sought amicable resolution of the dispute through joint discussion which were held on 21st December, 2006 and 17th July, 2007 but to no avail. In the facts and circumstances, the petitioner was constrained to invoke the arbitration clause and issued simultaneously a letter and notice dated 8th August 2007 and 13th August 2007 respectively and demanded appointment of an arbitrator in terms of arbitration agreement to adjudicate the disputes between the parties. The petitioner in notice dated 13th August, 2007 had also suggested names of the proposed arbitrator(s). No reply to the notice was given by the respondents nor was any arbitrator appointed despite service of notice on 14th August 2007 and also the suggestions given by the petitioner were not acted upon by the respondents. 7. Consequently, the petitioner has filed the present petition.
No reply to the notice was given by the respondents nor was any arbitrator appointed despite service of notice on 14th August 2007 and also the suggestions given by the petitioner were not acted upon by the respondents. 7. Consequently, the petitioner has filed the present petition. The learned Counsel for the petitioner has relied on : 131(2006) DLT 575 , Bharat Battery Manufacturing Co. Pvt. Ltd. v. Union of India to contend that since the notice invoking the arbitration agreement between the parties was duly served on the respondents on 14th August, 2007 and as no arbitrator has been appointed by the respondents within 30 days of the receipt of notice and even till the filing of the present petition, the right of the respondent to appoint an arbitrator stands forfeited and thereforee an arbitrator be appointed by this Court. 8. The petition is contested by the respondent and an affidavit of Ms. Ankita Mishra, Additional Director of Education (Admn), Directorate of the Education, Government of NCT of Delhi, computer education project cell, has been filed. The respondent has objected to the appointment of the arbitrator by this Court on the ground that pursuant to the receipt of notice dated 13th August 2007 Ms. Janak Juneja (retd.), IAS officer, has already been appointed as an arbitrator on 5th October 2007 by the Lieutenant Governor of Delhi. 9. The existence of arbitration agreement has not been disputed by the parties. The notice invoking the arbitration agreement was issued on 13th August 2007. The respondents were required to appoint an arbitrator within 30 days of the receipt of notice or till the filing of the petition. The respondent ought to have appointed an arbitrator within thirty days of notice seeking appointment of arbitrator or before filing of the present petition and since the arbitrator was not appointed before filing of the present petition, the right of the respondent stood forfeited and thereforee, after filing of the petition the respondent could not appoint an arbitrator. 10. The present petition under Section 11 of the Arbitration and Conciliation Act was filed by the petitioner on 17th September 2007 whereas the arbitrator has been appointed by the respondent only on 5th October, 2007 which in the facts and circumstances of the case cannot be said to be a validly appointed arbitrator as the respondent had already forfeited his right. 11.
11. The Apex Court in Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. IV (2000) CLT 191 : JT 2000 (2) SC 226 had held that if the vacancy of an arbitrator is not filled till a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11(6) of the Arbitration and Conciliation Act, the right to supply vacancy by the opposite party is extinguished. This ratio of Datar Switchgear Ltd. (supra) was approved by the Supreme Court in Punj Lloyed Ltd. v. Petronet MHB Ltd. : AIR 2006 SC 963 and it was reiterated that once period of notice had lapsed and the petitioner had moved under Section 11(6) of the Arbitration and Conciliation Act, 1996, the party having right to appoint arbitrator under arbitral agreement loses the right to do so. 12. A learned Single Judge in Haryana Telecom Ltd. v. Union of India and Anr. 112 (2004) DLT 339 : 2004 (3) RAJ 147, had held that if the respondent fails to appoint an Arbitrator within the stipulated time of 30 days of the notice, and even after filing of the petition under Section 11 of the Act, it is for the Court to appoint an Arbitrator. A Division Bench of this Court in Delkon (India) Pvt. Ltd. v. G.M., Bharat Heavy Electricals Ltd. : 120 (2005) DLT 542 , relying on Datar Switchgears Ltd. v. Tata Finance Ltd has held in para 4 as under: 4. We have given our careful consideration to the arguments advanced by learned Counsel for both the parties. In view of the law laid down in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. IV (2000) CLT 191 : JT 2000 (2) SC 226 it is no more rest integra that the vacancy can be supplied by a party pursuant to the arbitration agreement even after thirty days of the receipt of the notice. However, once a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11(6) of the Arbitration and Conciliation Act, the right to supply vacancy by the opposite party is extinguished.
However, once a party approaches the Court and files a petition for appointment by the designated authority of the Chief Justice of that Court under Section 11(6) of the Arbitration and Conciliation Act, the right to supply vacancy by the opposite party is extinguished. If that right stood extinguished on filing of the petition under Section 11(6) of the Arbitration and Conciliation Act, in September 1998 the appointment of an Arbitrator on 3rd May, 1999 could not be made, thereforee in our view, the order passed by the learned Single Judge on 7th May, 1999 suffers from patent illegality. thereforee, the submission of the respondent that the petitioner had appeared before the Arbitrator and the application of the petitioner raising preliminary objections is pending adjudication which inter alias challenges the jurisdiction of the Arbitrator to decide the dispute is of no consequence as from the order reproduced above it was pursuant to the directions passed by the learned Single Judge that the parties were directed to appear before the Arbitrator. The petitioner had no other option but to appear before the Arbitrator and after appearing before the Arbitrator the petitioner has not submitted to the jurisdiction of the Arbitrator, rather has at first opportunity taken the objection that the Arbitrator had no jurisdiction to proceed with the matter. 13. In Union of India v. R.R. Industries : 120 (2005) DLT 572 also it was held that once a party does not supply the vacancy or fails to supply the vacancy before filing of a petition under Section 11(6) of the Arbitration and Conciliation Act, such a party forfeits the right to supply the vacancy in terms of the arbitration clause and what remains is only the arbitration clause, i.e. the dispute has to be resolved under the mechanism of alternative dispute redressal scheme but no right survives to the respondent to supply the named Arbitrator in the arbitration clause. Thus the arbitrator was to be and could be appointed by the respondent before filing of the petition and not after the filing of the petition. 14. In totality of facts and circumstances, it is inevitable to infer that there is arbitration agreement between the parties which is reproduced hereinabove. The respondent failed to appoint an arbitrator within four weeks of notice given by the petitioner for appointment of an arbitrator.
14. In totality of facts and circumstances, it is inevitable to infer that there is arbitration agreement between the parties which is reproduced hereinabove. The respondent failed to appoint an arbitrator within four weeks of notice given by the petitioner for appointment of an arbitrator. Even before filing of the petition the arbitrator had not been appointed. Thus the right of the respondents to appoint the arbitrator stood forfeited and the respondent could not appoint an arbitrator thereafter. Consequently the arbitrator appointed by the respondent cannot act as an arbitrator as he could not be appointed as an arbitrator by the respondent and it is for this Court to appoint an arbitrator. 15. Considering the facts and circumstances, I appoint Mr. Justice Jaspal Singh (Retd.) 59, Hemkunt Colony, Near Nehru Place, Delhi (Mob: 9811070188, Res.: 26418081) as an Arbitrator to adjudicate all the disputes between the parties. The learned Arbitrator shall decide his fees and the procedure for adjudication of disputes between the parties. The parties shall appear before the Learned arbitrator on 14th January, 2008 at 4.30 PM. A copy of this order be sent to the learned arbitrator forthwith. The parties are also directed to give a copy of this order to the arbitrator. Copy of this order be given dusty to the parties.