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Madhya Pradesh High Court · body

2007 DIGILAW 80 (MP)

Mamta Singh v. Indian Oil Corporation Limited

2007-01-18

K.K.LAHOTI

body2007
ORDER 1. The applicant has filed an application under section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') for appointment of an arbitrator to decide the dispute between the parties. 2. The case of the applicant is that an agreement dated 10.10.2001 was entered between the parties for the allotment of a dealership of petroleum products at Khatakiya, District Guna. The dispute arose because of termination of the contract by the respondents and withholding the supply of petroleum products. The applicant filed a writ petition before the High Court of Madhya Pradesh, Bench at Gwalior, which was registered as WP No. 2227/2004 and was finally decided on 14.7.2005 by which the High Court directed the applicant to invoke arbitration clause and with the aforesaid direction, the petition was dismissed. Thereafter, the applicant served a notice on 16.8.2005 to the respondents for the appointment of an arbitrator to decide the dispute. This letter was served on the respondents on 16.8.2005. As no arbitrator was appointed within a period of 30 days, the applicant filed an application before the 1st Additional District Judge, Bhopal on 7.10.2005 for the appointment of the arbitrator. The aforesaid application has been transmitted to this Court in view of the pronouncement of the apex court in M/s. S.B.P. and Co. v. M/s. Patel Engineering Ltd. [2005 SCW.5932]. 3. Before this Court on notice, respondents caused appearance. The respondents raised a preliminary objection in the reply that on 20.10.2005, respondents appointed Shri S.Y. Narasimhan, Director (Finance) of IOC as sole arbitrator and this application may be dismissed. [n support of the aforesaid contention, the respondents have filed document i.e. copy of letter dated 20th October, 2005 by which the aforesaid arbitrator was appointed and submitted that as the Arbitrator has been appointed by the respondents, so this petition may be dismissed as rendered infructuous. This contention of the respondents is opposed by Shri Naman Nagrath, counsel for applicant, on the ground that under clause 67 of the agreement, though no limitation is provided for the appointment of an arbitrator, but a period of 30 days has been prescribed, under sub-section (5) of section 11 of the Act. The respondents were under obligation to appoint an arbitrator within a period of 30 days from the date of receipt of request of the applicant. The respondents were under obligation to appoint an arbitrator within a period of 30 days from the date of receipt of request of the applicant. Now the applicant has a right for the appointment of an independent arbitrator through this Court. Reliance in placed to the apex Court judgment in the case of Punj Lloyd Ltd. v. Petronet MHB Ltd. [ (2006) 2 SCC 638 ] and a judgment of Single Bench of this Court in Narain Industries v. Diamond Cements [ 2005 (4) MPLJ 583 ]. It is submitted that an independent arbitrator be appointed in the matter. 4. Shri S.C. Sharma, the learned senior Advocate for respondents, opposed the contention and submitted that after appointment of the arbitrator, who has been appointed as per clause 67 of the agreement, this petition has rendered infructuous and another person cannot be appointed as an arbitrator. Reliance is placed to a Single Bench judgment of this Court in M/s. Krishna Constructions v. Union of India in MCC No. 869 of 2006 dated 17.11.2006 and judgment of the Kerala High Court in National Thermal Power Corporation Limited v. Raghul Construction Pvt. Limited [2006 (2) RAJ 108 (Ker)] and, submitted that this application may be dismissed. 5. To appreciate the rival contentions of the parties, clause 67 of the agreement which is relevant in the present case may be seen which reads thus: "Any dispute and/or difference of any nature whatsoever or regarding any right, liability, act, omission on account of any of the parties hereto arising out of or in relation to disagreement 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 nominated is an employee of the Corporation and may be a shareholder 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 or vacation of office or inability to act, may designate another officer of the Corporation to act as arbitrator, in accordance with the terms of the agreement. Such personal 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 agreement 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 reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause." The aforesaid clause though provides redressal of the dispute by the arbitrator, but does not provide any limitation to the respondents for the appointment of an arbitrator. When such is the position, the statutory provisions under the Act shall apply. Section 11 (5) of the Act provides as under: "11. Appointment of arbitrators.-- (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitration within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him." 6. In this case, the applicant sent a written request for the appointment of an arbitrator on 16.8.2005 which is not in dispute, and the respondents had not appointed any arbitrator within 30 days inspite of receipt of a request of the applicant on 16.8.2005. In these circumstances, the position is changed. The apex Court considering the question held in Punj Lloyds Ltd. (supra) thus: "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 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 holding that the only remedy available to the appellant was to move in accordance with the clause 14.1 above said, 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 Data Switchgears Ltd. v. Tata Finance Ltd. [(2000) 8 SCC 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 before the former files application under section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases." (emphasis in original) 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. Only then the right of the opposite party ceases." (emphasis in original) 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 position in the present case is identical to the Punj Lloyd Ltd. (supra). The written request for appointment of an arbitrator was made on 16.8.2005 but no arbitrator was appointed under clause 67 of the agreement by the respondents within a period of 30 days. Before filing of the application for arbitration, the applicant approached to the High Court of M.P., Bench Gwalior by filing the aforesaid writ petition, in which the respondents contested the case on the ground that there is an arbitration clause for the redressal of the dispute and the writ petition is not maintainable and the applicant may invoke alternative remedy for deciding the dispute by the Arbitral Tribunal. The aforesaid objection raised by the respondents was sustained and the High Court dismissed the writ petition by order dated 14.7.2005. This fact shows that the respondents had contested the matter on the pretext that the applicant ought to have invoked the arbitration clause and the writ petition was not maintainable. After the aforesaid decision, the applicant made a written request to the respondents 16.8.2005, the respondents had not taken any step for the appointment of an arbitrator within the statutory period of 30 days. This application was filed on 7.10.2005 before the. 1st Additional Judge, Bhopal. Till that date, no arbitrator was appointed by the respondents for decision. A notice was issued on 10.10.2005 and the case was fixed for reply and arguments. After issuance of the notice by the 1st Additional District Judge, Bhopal, respondents appointed an arbitrator on 20th October, 2005 as reflects from the letter filed by the respondents along with the reply. Till that date, no arbitrator was appointed by the respondents for decision. A notice was issued on 10.10.2005 and the case was fixed for reply and arguments. After issuance of the notice by the 1st Additional District Judge, Bhopal, respondents appointed an arbitrator on 20th October, 2005 as reflects from the letter filed by the respondents along with the reply. The respondents were having right to appoint arbitrator within 30 days as per section 11 (6) of the Act and even if the aforesaid arbitrator was not appointed within the aforesaid period, then before filing of the application, before the District Court, if/the arbitrator could have been appointed, then the objection of the respondents was having some substance, but after filing of the application before the 1st Additional District Judge, Bhopal if the respondents have appointed an arbitrator, it will not take away the right of the applicant for the appointment of an independent arbitrator as held by the apex Court in Pun) Lloyd Ltd. (supra). 8. The learned counsel appearing for respondents has relied upon the judgment of the Single Bench of this Court in M/s. Krishna Constructions (supra). The factual position of the aforesaid case was different. In the aforesaid case, in the agreement itself the period of appointment of an arbitrator, after a written request was 180 days. The contention of M/s. Krishna Constructions before the High Court was that if the arbitrator had not been appointed within the period of 30 days. then the High Court has power to appoint an independent arbitrator. But the Court considering the fact that under arbitration clause a period of 180 days was provided and the application before the Court was filed before 180 days of making a written request under the clause, so the application was dismissed as premature. The factual position in the present case is entirely different. No period is provided under clause 67 of the agreement, so the statutory period as provided under section 11 (5) of the Act will apply. Admittedly, within the aforesaid period no arbitrator was appointed by the respondents. The arbitrator has been appointed by the respondents after filing of the application on 20.10.2005. No period is provided under clause 67 of the agreement, so the statutory period as provided under section 11 (5) of the Act will apply. Admittedly, within the aforesaid period no arbitrator was appointed by the respondents. The arbitrator has been appointed by the respondents after filing of the application on 20.10.2005. The aforesaid appointment of arbitrator has no affect on the rights of the petitioners and the aforesaid appointment is contrary to the provisions of section 11 (5) of the Act, as held by the apex Court in Pun) Lloyds Ltd. (supra). Consequently, this application is allowed and it is directed that for adjudication of the dispute between the parties, an independent arbitrator be appointed. 9. The learned counsel appearing for parties were asked to suggest name of the arbitrator. Shri S.C. Sharma, appearing of behalf of respondents, made a request that any former Judge of this Court may be appointed as an arbitrator. Shri Naman Nagrath for the applicant submitted that looking to the nature of the dispute some former District Judge may be appointed to adjudicate the dispute. 10. Considering the controversy involves in this case, in the opinion of this Court, some former Judge of the High Court deserves to be appointed as an arbitrator. With the consent of the parties, Justice Shri K.L. Israni, (Retd. Judge of High Court of M.P.) is appointed as an 'arbitrator to decide the dispute in the matter. A copy of this order be sent to Justice Shri K.L. Israni, by the Registrar. Accordingly, the application is allowed. Cost of the application shall be subject to final decision in the arbitration proceedings.