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2009 DIGILAW 95 (DEL)

Puneet Chandna v. Sanjay Kumar

2009-01-23

ANIL KUMAR

body2009
ANIL KUMAR, J. 1. This is a petition under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator. The petitioner contended that he entered into a partnership agreement for running the business under the name and style of M/s. Unigenetics Inc having registered office at C-1/121, First Floor, Janakpuri, New Delhi. The share of the plaintiff was 55% whereas the share of the respondent was 45%. According to the petitioner, the partnership was dissolved and a deed of dissolution dated 6th January, 2007 was executed which was duly signed by the parties. 2. It is asserted by the petitioner that few days after the execution and singing of deed of dissolution, the respondent along with his brother, Mr. Rajiv Jain started threatening the petitioner and his wife. According to the petitioner, in gross violation of the terms of dissolution, the respondent has illegally, wrongfully and fraudulently transferred Rs.1824/- to one Mr. Prabhjeet Singh. The respondent also withdrew a sum of Rs.7,32,824/- against the total credit of Rs.6,66,035/-. It is contended that the respondent has withdrawn a sum of Rs.67,789/- in excess from the accounts of the firm. The respondent has also alleged to have fraudulently generated false and fabricated invoices in back date which do not find mention in Annexure-C to the deed of dissolution. An allegation has also been made regarding issuance of a cheque on the firms Federal Bank account. 3. The petitioner in the circumstances has claimed a sum of Rs.62,13,613/- from the respondent which amount also includes the amounts claimed by the petitioner towards distress, embarrassment, illegal and fraudulent withdrawals which amount the respondent is not paying and thus disputes have risen about the partnership business between the parties.. 4. According to petitioner, there is arbitration agreement in terms of Clause 13 of the partnership deed which is as under : Clause 13. That any dispute concerning the partnership of this deed shall be referred to and decided as per the provisions of Indian Arbitration Act then in force. 5. The petitioner contends that a notice dated 16th June, 2007 was given invoking the arbitration agreement between the parties which was replied by a communication dated 23rd June, 2007. However, the Arbitrator has not been appointed. 6. On failure to appoint the Arbitrator, the petitioner filed the present petition on 7th August, 2007. 7. 5. The petitioner contends that a notice dated 16th June, 2007 was given invoking the arbitration agreement between the parties which was replied by a communication dated 23rd June, 2007. However, the Arbitrator has not been appointed. 6. On failure to appoint the Arbitrator, the petitioner filed the present petition on 7th August, 2007. 7. The petition is contested by the respondent contending, inter alia, that there is no arbitration agreement between the parties as a dissolution deed dated 6th January, 2007 was executed. It is further contended that the disputes raised between the parties are not adjudicable in the arbitration proceedings. It is contended that the allegations made against the respondent are false. Various allegations raised by the petitioner were denied by the respondent. 8. I have heard the learned counsel for the parties. It cannot be disputed that the Arbitrator has not been appointed for adjudication of disputes raised by the petitioner in terms of Clause 13 of the partnership deed which is the arbitration agreement. Though in terms of deed of dissolution dated 6th January, 2007, the partnership was dissolved, however, the disputes which have been raised by the petitioner pertains to partnership. Whether those disputes do not exist due to execution of deed of dissolution is also a dispute which is to be adjudicated. Whether these disputes are not to be arbitrated in view of execution of dissolution deed is also to be decided by the Arbitrator. 9. The petitioner had invoked the arbitration agreement by notice dated 9th April, 2007. Though the notice was replied by a communication dated 23rd June, 2007, the respondent have not appointed an arbitrator within 30 days of invocation of arbitration agreement and/or before the filing of this petition on 7th August, 2007, and consequently he has lost the right to appoint an arbitrator of his choice. 10. Though the notice was replied by a communication dated 23rd June, 2007, the respondent have not appointed an arbitrator within 30 days of invocation of arbitration agreement and/or before the filing of this petition on 7th August, 2007, and consequently he has lost the right to appoint an arbitrator of his choice. 10. In Union of India v. M/s. R.R. Industries, 120 (2005) DLT 572 (DB) 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. In the present facts and circumstances there is no named arbitrator. 11. A three-Judge Bench of this Court in Punj Lloyd Ltd. v. Petronet MHB Ltd., III (2006) SLT 287=II (2006) CLT 251 (SC)= (2006) 2 SCC 638 , considered the applicability of Section 11(6) 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. and Another, VII (2000) SLT 543=IV (2000) CLT 191 (SC)= (2000) 8 SCC 151 , wherein at page 158 (para 19) SCC, it was held as under : 19. So far as cases falling under Section 11(6) are concernedsuch 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. 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. 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. 12. In the circumstances, it will be just and appropriate to appoint an arbitrator to adjudicate the disputes which are raised and which may be raised by the parties. 13. Considering the facts and circumstances, Sh.B.L.Garg (Retd) Additional District Judge, r/o.A-9, Ganpati Apartments, 6, Alipur Road, Civil Lines, Delhi- 110054,( Cellular No.9810827815) is appointed as an arbitrator. The fees of the arbitrator shall be Rs.10,000/- per hearing subject to a maximum of Rs.1,50,000/-. The fees of the arbitrator shall be shared equally. The learned Arbitrator shall decide his procedure for adjudication of the disputes. The parties are directed to appear before the learned arbitrator on 12th February, 2009 at 4.30 PM. A copy of this order be sent to the learned arbitrator. Copies of the order be also given to the parties dasti.