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2017 DIGILAW 1171 (KER)

Spaceinfra Interior Solutions (P) Limited v. Moat Project Management (P) Limited

2017-08-22

SHAJI P.CHALY

body2017
JUDGMENT 1. The parties In the aforesaid Arbitration Requests are one and the same.. The subject matter relates to two agreements entered into by and between the parties. Earlier, petitioners have submitted Arbitration Request Nos.61 and 62 of 2016, which were disposed of by a learned Single Judge of this Court on 09.08.2016, by appointing an arbitrator on behalf of the respondent in accordance with the terms of the agreement and as suggested by the respondent therein. The agreements in question were executed by and between the parties by incorporating clause 7 to decide any disputes by resorting to the provisions of Arbitration and Conciliation Act, 1996, which read thus: "7. All disputes arising out of or in any way connected with this agreement shall be settled by arbitration in accordance with the Indian Arbitration & Conciliation Act, 1996 or any statutory amendment thereof. The Arbitral tribunal shall consist of 3 Arbitrators one each appointed by the Owner and the Contractor. The third Arbitrator shall be chosen by the two arbitrators so appointed by the parties and shall act as Presiding Arbitrator. " 2. The case has somewhat a checkered history. When the dispute arose by an between the parties, petitioner invoked Clause (7) of the agreement dated 17.08.2015 and 04.09.2015 respectively, and referred all the disputes and differences to arbitration, and as per the terms of the sard clause, nominated and appointed its arbitrator. Since the respondent failed to appoint its arbitrator petitioner filed A.R..Nos.61 and 62 of 2016 under Sec. 11(4)(a) of the Arbitration and Conciliation Act, 1996 [for short, Act, 19961. As per Annexure-B common order dated 09.08.2016, an arbitrator for and on behalf of the respondent was appointed by this Court. 3. Thereafter, the Presiding Arbitrator was nominated by the arbitrators and the first sitting of the Arbitral Tribunal was held on 07.10.2016 and the pleadings were completed on 10.03.2017. Thereafter, the respondent by letter dated 23.03.2017 raised doubts regarding the independence and impartiality of the Presiding Arbitrator, and thereupon the Presiding Arbitrator by proceedings dated 07.04.2017 passed a detailed order rebutting the allegations, however, decided to withdraw from the Tribunal. Subsequently, the arbitrators nominated a new Presiding Arbitrator. But, on the first day of the sitting of the Tribunal, i.e., 09.06.2017, the nominated arbitrator of the respondent withdrew from the proceedings casting allegations of impartiality on the new Presiding Arbitrator. Subsequently, the arbitrators nominated a new Presiding Arbitrator. But, on the first day of the sitting of the Tribunal, i.e., 09.06.2017, the nominated arbitrator of the respondent withdrew from the proceedings casting allegations of impartiality on the new Presiding Arbitrator. The Presiding Arbitrator and: the other nominated arbitrator passed a detailed proceedings dated 09.06.2017 repelling all the allegations raised, but decided to withdraw from the arbitration proceedings. 4. Even though the nominated arbitrator of the respondent had withdrawn as on 09.06.2017, till date the respondent has not nominated/substituted their arbitrator. Hence, an arbitrator has to be appointed/substituted on behalf of the respondent under Sec.11(4)(a) r/w Sec.15(2) of the Act, 1996 for the constitution of the Tribunal as under the arbitration agreement between the parties for the determination of all disputes and differences, arising out and in respect of the said agreement. 5. Separate counter affidavits are filed by the respondent in the arbitration requests. The basic contention raised therein is that the arbitration requests are not maintainable either on taw or on facts. According to the respondent, the arbitration requests were filed by the petitioner company without sending a notice as required under Sec. 15(2) r/w Sec.11(3) and (4) of Act 1996. It is also stated that only after the failure of the respondent to appoint an arbitrator for and on its behalf within 30 days from the receipt of request, the petitioner is entitled to approach this Court seeking for appointment of an arbitrator. No such request has been made by the petitioner, and therefore, the requests are not maintainable under law. 6. Learned counsel for the respondent has relied on the principles of law laid down by the apex court in Huawei Technologies Company Ltd. v. Sterlite Technologies Ltd. 7. A reply affidavit is filed by the petitioner reiterating the stand adopted in the requests and contends that the contentions advanced by the respondent are not legalistic, and therefore, unsustainable. 8. Heard learned counsel for the petitioner and the learned counsel appearing for the respondent. Perused the documents on record and the pleadings put forth by the respective parties. 9. A reply affidavit is filed by the petitioner reiterating the stand adopted in the requests and contends that the contentions advanced by the respondent are not legalistic, and therefore, unsustainable. 8. Heard learned counsel for the petitioner and the learned counsel appearing for the respondent. Perused the documents on record and the pleadings put forth by the respective parties. 9. The sole question to be considered is whether an arbitrator is to be appointed by this Court since the arbitrator nominated by the respondent in the proceeding has recused from being a member of the Tribunal constituted in accordance with Clause 7 of the agreement entered into by and between the parties. None of the aspects that was considered by this Court in the earlier round of litigation is not under dispute. Therefore, it is evident that dispute is existing by and between the parties, and thereupon only, an arbitrator was appointed by this Court for and on behalf of the respondent, evident from Annexure-B order of this Court. 10. Now the question to be considered is, in order to appoint a substitute arbitrator, whether a notice is mandated before invoking the provisions of Sec. 11 of the Arbitration Act. Section 15 deals with termination of mandate and substitution of arbitrator, which read thus: "15. Termination of mandate and substitution of arbitrator.-- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate-- (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. (3) Unless otherwise agreed by the parties, where an arbitrator is replaced under subsection (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal. (4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal." 11. (4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal." 11. On a reading of sub-section (2) of the said provision, it is categoric and clear that, where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. The rule created upon by the parties is clause 7 of the arbitration agreement, whereby, each party will have to nominate their own arbitrators, who will nominate the Presiding Arbitrator. Therefore, when the arbitrator from the side of the respondent recused , as per sub-section (2) of Sec. 15 of the Act, respondent ought to have appointed an arbitrator. Since the respondent failed to appoint the arbitrator within a reasonable time, petitioner has approached this Court. Therefore, in my considered opinion. Sec. 15 is independent of Sec.11 of Act, 1996. When there is a procedure on termination prescribed under Sec.15, no separate notice is mandated before approaching this Court, seeking appointment of an arbitrator. 12. Learned counsel for the respondent in that regard has invited my attention to the judgment in 'Huawei Technologies Company Ltd.' (supra), to canvass the proposition that when an arbitrator has recused himself, a substitute or new arbitrator is required to be appointed according to the rules that were applicable to the appointment of the original arbitrator. Learned counsel has specifically invited my attention to paragraph 8 of the said judgment, which read thus: "8. Clause 22.3 of the supply contract contemplates appointment of a sole arbitrator by the parties by mutual consent. In a situation where the original arbitrator i.e. Shri Justice S.K. Dubey had recused himself the substitute or new arbitrator is required to be appointed according to the rules that were applicable to the appointment of the original arbitrator. This is the mandate of Section 15(2) of the Act. It was, therefore, incumbent on the petitioner to give notice and explore the possibility of naming an arbitrator by mutual consent and only failure thereof the present application under Section 11(6) of the Act could/should have been filed. This is the mandate of Section 15(2) of the Act. It was, therefore, incumbent on the petitioner to give notice and explore the possibility of naming an arbitrator by mutual consent and only failure thereof the present application under Section 11(6) of the Act could/should have been filed. The above recourse is required to be followed by virtue of the provisions of Section 15(2) of the Act and the decision of this Court in Yashwith Constructions (P) Ltd. Admittedly, the same had not been followed. In these circumstances, the Court will understand the present application/arbitration petition to be premature. It is accordingly not entertained leaving it open for the petitioner to act appropriately, if so advised, in terms of the present order and thereafter seek its remedies as provided by law." 13. However, on a reading of the facts and circumstances involved in the said case, ft is dearly evident that the agreement therein entered into by and between the parties was for appointment of an arbitrator by mutual consent. However, the applicant therein did not issue a notice and approached the High Court for appointment of the arbitrator. It was thereupon the apex court held that a notice should have been issued to explore the possibility of appointing an arbitrator on mutual agreement Anyhow, the facts and circumstances and the stipulations contained in Clause 7 of the agreement are entirety different. Each parties are at liberty to appoint their own arbitrators. Therefore, the respondent had ail the liberty to appoint an arbitrator when the arbitrator appointed for and on behalf of the respondent had recused from the Tribunal. Accordingly, in my considered opinion, the judgment relied upon by the respondent has no sustenance with the facts and circumstances of these cases. 14. It is truer respondent has nominated Senior Advocate Sri. N. Sukumaran (formerly District Judge) to act as an arbitrator on its side. In my considered opinion, the case has a checkered history as explained above, and I am conscious of appointing an arbitrator by the Court in order to attain a finality to the whole issue within, the time frame prescribed under the Arbitration and Conciliation Act, 1996. The Act, 1996 is constituted for the purpose of attaining finality to the litigations without any delay. Therefore, the facts and circumstances involved in these cases show that the same is being protracted unnecessarily. 15. The Act, 1996 is constituted for the purpose of attaining finality to the litigations without any delay. Therefore, the facts and circumstances involved in these cases show that the same is being protracted unnecessarily. 15. In that view of the matter, I appoint Sri.T.V.Mammootty, Advocate, 3rd Floor, Edassery Building, High Court Junction, Banerji Road, Ernakulam as the arbitrator for and on behalf of the respondent. The arbitrator shall proceed in accordance with law, and in accordance with Clause 7 of the agreement, nominate the Presiding Arbitrator and attain finality to the arbitration proceedings in accordance with the provisions of Act, 1996. The petitioner shall secure a disclosure statement from the arbitrator as prescribed under Sec.11(8) of the Act and the registry shall issue certified copy of this order only after securing the disclosure statement. The original of the disclosure statement shall be retained and a copy shall be attached to the order. The arbitration requests are disposed of accordingly.