M. J. Engineering Works (P) Ltd. v. Bharat Heavy Electrical Ltd. Bhopal
2008-09-23
K.K.LAHOTI
body2008
DigiLaw.ai
ORDER 1. This application is directed under section 11 (6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') for constitution of an Arbitral Tribunal to decide the dispute between the parties. 2. Facts as stated in the application are as under: (a) That, the applicant is a company registered under the Companies Act, 1956 engaged in the business of fabrication and supply of G.I. structures, etc. (b) That, respondent invited offers for supply of the G.I. structures, in response of which applicant made offer dated 12.11.2003 for supply of G.I. structures. The respondent issued a purchase order No. 4538169 dated 15.11.2003 for fabrication and supply of structures. The total value of the order was stipulated at Rs. 59,40,000/-. Purchase order is on record as Annexure A-I. There were certain disputes in respect of performance of the aforesaid order, in respect of which allegations are made in the application but it is not necessary for this Court to refer all the aforesaid disputes, while deciding the application under section II (6) of the Act. (c) Because of the disputes in connection with the contract, the applicant invoked the arbitration clause and vide notice dated 20.2.2006 made a request to the Executive Director of respondent for adjudication and arbitration of the claims and in the alternative to appoint an independent arbitrator and refer the dispute for adjudication to the said arbitrator. A copy of the notice dated 20.2.2006, Annexure A-27 is on record. The notice was sent by registered post on 21.2.2006. A copy of the postal receipt is on record at page 168 of the paper book. Another copy of the notice was sent by UPC also. Copy of the receipt of UPC is on record at page 169 of the paper book. (d) After waiting for a period of 30 days, when the respondent had not acceded the prayer of the petitioner, for adjudication of the dispute or referring the matter to the arbirator, this application was filed for the constitution of an arbitral tribunal. 3. This application was filed on 23.9.2006 and on 29.9.2006, after admission, a notice was issued to the respondent. Notice was served on the respondent on 23.4.2008. On 26.6.2008 respondent caused appearance and sought time to file reply. The case was adjourned to 27.8.2008 but no reply was filed and the matter was heard finally. 4.
3. This application was filed on 23.9.2006 and on 29.9.2006, after admission, a notice was issued to the respondent. Notice was served on the respondent on 23.4.2008. On 26.6.2008 respondent caused appearance and sought time to file reply. The case was adjourned to 27.8.2008 but no reply was filed and the matter was heard finally. 4. Learned counsel for the respondent opposed the application, stating that the respondent had not failed to appoint the arbitrator but had appointed the arbitrator on 30.5.2008. Shri G. Subedar was appointed as an arbitrator, so this application has rendered infructuous and may be dismissed. It was submitted that once arbitrator was appointed, petitioner ought to have filed an application under section 13 (4) of the Act for removal of such arbitrator and by allowing this application arbitrator appointed by the respondent cannot be removed. 5. Aforesaid contention was opposed by the applicant on the ground that after service of notice dated 20.2.2006 on 24.2.2006, respondent had not appointed an arbitrator. This application was filed on 23.9.2006 and the respondent was served on 23.4.2008. After filing of this application, respondent had lost his right to appoint an arbitrator. Reliance was placed by the respondent to the judgment of the apex Court in Union of India v. Bharar Battery Mfg. Co. (P) Ltd. (2007) 7 SCC 684 and submitted that to decide the dispute between the parties, an arbitrator may be appointed. 6. To appreciate the aforesaid contention, firstly, the factual position may be looked into. In this case, arbitration clause between the parties is as under: "2.34.
Co. (P) Ltd. (2007) 7 SCC 684 and submitted that to decide the dispute between the parties, an arbitrator may be appointed. 6. To appreciate the aforesaid contention, firstly, the factual position may be looked into. In this case, arbitration clause between the parties is as under: "2.34. Arbitration Except where otherwise provided for in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions, herein before mentioned and as to the quality of workmanship or materials, used on the work or as to any other question, claim, right matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, Instructions, orders or these conditions or otherwise concerning the works, or the execution or failure to execute, the same whether arising during the progress of the work or after the compeletion or abandonment thereof shall be referred to the sole arbitration of the Executive Director/General Manager, Bharat Heavy Electricals Ltd. Bhopal and if the Executive Director/General Manager is unable or unwilling to act, then to the sole arbitration of some other person appointed by ED/GM willing to act as such arbitrator. There will be no objection if the arbitrator so appointed is an employee of Bharat Heavy Electricals Ltd. and that he had to deal with matters to which the contract relates and that in the course of his duties as such he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred vacating his office or being unable to act for any reason, such Executive Director/General Manager as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the term of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor, it is also a term of this contract that no person appointed by such Executive Director/ General Manager as aforesaid should act as arbitrator and if for any reason, that is not possible the matter is not to be referred to arbitration at all. In cases where the amount of the claim in dispute is Rs. 50,000/- (Rs. fifty thousand) and above, the arbitrator shall give reasons for the award.
In cases where the amount of the claim in dispute is Rs. 50,000/- (Rs. fifty thousand) and above, the arbitrator shall give reasons for the award. Subject as aforesaid the provision of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this (clause) together with the amount or amounts claimed in respect to each such dispute. The arbitrator(s) may from time to time with consent of the parties enlarge the time for making and publishing the award. The work under the contract shall if reasonably possible, continue during the arbitration, proceedings and no payment due or payable to the contractor shall be withheld on account of such proceedings. The arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first hearings. The arbitrator shall give a separate award in respect of each dispute or difference to him. The venue of arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The award of the arbitrator shall be final, conclusive and binding on all parties to this contract." It is not in dispute that the aforesaid arbitration clause is applicable between the parties. The arbitration clause specifically provided that in case of any dispute, the matter shall be referred to the sole arbitration of the Executive Director/General Manager, Bharat Heavy Electricals Ltd., Bhopal and if the Executive Director/General Manager is unable or unwilling to act, then to the sole arbitration of some other person appointed by Executive Director/General Manager, willing to act as such arbitrator. 7. In this case, the letter of request was made to respondent on 20.2.2006 and the aforesaid letter was served on the respondent, as per certificate of Department of Post dated 4.8.2008, on 24.2.2006. Thereafter, this application was filed on 23.9.2006 and notice was served on respondent on 23.4.2008. In the light of aforesaid factual position, the legal position as settled by the apex Court in Bharat Battery Mfg. Co. (P) Ltd. (supra) may be looked into, thus: 12.
Thereafter, this application was filed on 23.9.2006 and notice was served on respondent on 23.4.2008. In the light of aforesaid factual position, the legal position as settled by the apex Court in Bharat Battery Mfg. Co. (P) Ltd. (supra) may be looked into, thus: 12. A three-Judge Bench of this Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. 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 had 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. v. Tata Finance Ltd. wherein at SCC p. 158, para 19, 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 right of the opposite party ceases.
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 within 30 days of demand, the right to appoint an arbitrator under section 11 (6) is forfeited." (emphasis in original) 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. 13. 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. 8. The facts of the present case are similar. The applicant filed this application on 23.9.2006, thereafter, the respondent lost right to appoint an arbitrator in terms of the clause of the agreement. The right to appoint an arbitrator under the aforesaid clause ceased, after section 11 (6) of the Act was invoked by the applicant before this Court, seeking appointment of an arbitrator. In this application, respondent was served on 23.4.2008 and thereafter respondent appointed an arbitrator Shri G. Subedar on 30.5.2008 which was apparently without jurisdiction. So It IS not necessary for the applicant to file an application under section 13 (4) 0 the Act for removal of such an arbitrator. The contention of Shri Ashok Lalwani that after appointment of an arbitrator, applicant ought to have filed an application under section 13 (4) of the Act has no substance. The arbitrator so appointed has no right and jurisdiction to proceed further in the matter and such order can be ignored by this Court. 9.
The contention of Shri Ashok Lalwani that after appointment of an arbitrator, applicant ought to have filed an application under section 13 (4) of the Act has no substance. The arbitrator so appointed has no right and jurisdiction to proceed further in the matter and such order can be ignored by this Court. 9. In view of above discussion, which finds support by the judgment of apex Court in Bharar Battery Mfg. Co. (P) Ltd. (supra), this application deserves to be allowed, and it is allowed. For deciding the dispute between the parties, an arbitral tribunal is constituted. Shri Justice T.S. Doabia, a former judge of this Court is appointed as an arbitrator to decide the dispute between the parties. office to communicate this order to Justice Shri Doabia. Considering facts of the case, there shall be no order as to costs.