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2008 DIGILAW 660 (DEL)

N. R. DONGRE v. L. R. M. SECURITIES LTD.

2008-07-07

HIMA KOHLI

body2008
JUDGMENT HIMA KOHLI, J. The present petition is filed by the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') against the respondents. Counsel for the petitioner states that the petitioner and the respondents entered into an agreement dated 27.01.2004, where under the parties agreed to settle their disputes in respect of the sale transaction of certain shares of IBP Company for Rs. 35 lakhs. He submits that the aforesaid agreement contains an arbitration clause, being Clause 12, where under it was stipulated that in the event of any disputes and differences arising between the parties, with regard to the terms and conditions of the agreement, the same shall be referred to arbitration in accordance with the provisions of the Act. Counsel for the petitioner submits that pursuant to the execution of the aforesaid agreement, the respondents issued five post dated cheques, out of which two cheques for Rs. 10 lakhs each were dishonoured by the bankers of the respondents on presentation, on the ground of insufficient funds. Pursuant thereto, the petitioner served a legal notice dated 17.01.2007 upon the respondents calling upon them to pay the outstanding dues to the petitioner in terms of the agreement, failing which, the respondents were informed that the petitioner will be compelled to initiate arbitration proceedings against them. The aforesaid legal notice was duly served upon the respondents who replied thereto, vide letter dated 23.01.2007, asking the petitioner to forward a copy of the agreement, which was also done by the petitioner under cover of letter dated 07.02.2007. Counsel for the petitioner submits that despite the aforesaid, the respondents failed to adhere to the terms and conditions of the agreement by not paying the entire outstanding dues totalling to Rs. 20 lakhs along with interest thereon. As a result, the petitioner issued a legal notice dated 25.01.2007, informing the respondents that disputes had arisen between the parties and as the respondents failed to respond to the petitioner, the petitioner was invoking the arbitration clause governing the parties. The petitioner also proposed the names of two arbitrators to the respondents for referring the disputes that had arisen between the parties for adjudication under the Act. However, despite service of the aforesaid notice, the respondents did not reply thereto, nor did they take any steps for appointment of an arbitrator, thus compelling the petitioner to file the present petition. The petitioner also proposed the names of two arbitrators to the respondents for referring the disputes that had arisen between the parties for adjudication under the Act. However, despite service of the aforesaid notice, the respondents did not reply thereto, nor did they take any steps for appointment of an arbitrator, thus compelling the petitioner to file the present petition. Notice was issued on the present petition vide order dated 30.11.2007. Appearance was entered on behalf of the respondents on 15.02.2008, and time was sought to file reply. The matter was renotified for 05.05.2008 for arguments. On 05.05.2008, none appeared on behalf of the respondents, nor was any reply filed. Last opportunity was granted to the respondents to file a reply within two weeks, failing which it was directed that the respondents' right to file reply shall stand closed. Neither the reply has been filed nor is anyone present on behalf of the respondents today. Counsel for the petitioner submits that despite entering appearance in another connected matter between the parties, being OMP No. 152/2007, which was preferred by the petitioner under Section 9 of the Act, the respondents did not appear thereafter. As a result, the aforesaid petition was disposed of vide order dated 01.04.2008, while granting an interim order in favour of the petitioner, which is continuing to operate till date. A copy of the order dated 01.04.2008, passed in OMP No. 152/2002, is handed over by the counsel for the petitioner and is taken on record. The law with regard to appointment of an arbitrator is well settled. In the case of Datar Switchgears Ltd. v. Tata Finance Ltd. and another reported in IV (2000) CLT 191 (SC) = VII (2000) SLT 543 = JT 2000 Supp (2) SC 226 = 2000 (3) Arb. LR 447 (SC) the Supreme Court has held that if the vacancy of an arbitrator is not filled till the party approaches the court and files a petition for appointment of an arbitrator by the designated authority of the Chief Justice of that court under Section 11(6) of the Arbitration and Conciliation Act, 1996, the right to supply the vacancy by the opposite party stands extinguished. The ratio of the aforesaid case was approved by the Supreme Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. reported in (2006) 2 SCC 638 = 2006 (1) Arb. The ratio of the aforesaid case was approved by the Supreme Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. reported in (2006) 2 SCC 638 = 2006 (1) Arb. LR 528 (SC) and it was again followed by a Division Bench of this court in the case of Delkon (India) Pvt. Ltd. v. G.M., Bharat Heavy Electricals Ltd. reported in 120 (2005) DLT 542 (DB) = 2005 (2) Arb. LR 272 (Del.) (DB). In view of the aforesaid judgments, the respondents have lost their right to appoint an arbitrator, having failed to do so within 30 days from the date of receipt of the notice from the petitioner for appointment of an arbitrator or even prior to the date of institution of the present petition. In these circumstances, the present petition is allowed. Justice Sharda Aggarwal (Retd.) is appointed as the sole arbitrator to adjudicate all the disputes arising between the parties. The parties shall share the fee in equal proportions, which shall be fixed by the learned arbitrator. The parties shall appear before the learned arbitrator on 30th July, 2008 at 4.30 p.m. In view of the fact that none has appeared on behalf of the respondents today, the learned arbitrator is requested to effect service upon the respondents before proceeding with the matter. The Registry is directed to forward a copy of the order to the learned arbitrator forthwith for perusal. The parties are also directed to intimate the learned arbitrator about the order. The petition is disposed of.