Shahpoorji Palloonji & Company Private Limited v. AECOS Ltd.
2019-01-17
L.NARAYANA SWAMY, P.B.BAJANTHRI
body2019
DigiLaw.ai
JUDGMENT : P.B. Bajanthri, J. 1. Application is under Section 15(2) of the Arbitration and Conciliation Act, 1996 (for short the Act) read with Section 151 of the Code of Civil Procedure, 1908. Applicant has sought for the following reliefs: (i) Confirm the nomination of Mr. G.C. Tallur as the applicant's nominee to the Arbitration Proceedings pending between the parties to the present application. (ii) To pass such other orders, it may deem fit to grant in the facts and circumstances of the case, in the interests of justice and equity. 2. The applicant Shapoorji Pallonji and Company Private Limited is a company incorporated under the Companies Act, 1913. The applicant are into the construction company in India providing services to Corporation's, Governments and International Clients across various sectors (for short applicant). The respondent AECOS Limited is a company incorporated under the laws of NEBADA in U.S.A. The respondent is engaged in the business of design, engineering, procurement, construction, commissioning and management (for short respondent). 3. A.P.I.M. No. 1/2016 was disposed on 27.02.2017 in terms of a joint memo filed by the claimant no. 1 applicant and respondent. Para 4 of the joint memo which empowers the arbitrators of the respective party to appoint the presiding arbitrator preferably from Bengaluru. Claimant no. 1 applicant appointed Mr. Ajith B. Pawar, former Secretary of the Government of Maharashtra as its arbitrator. Similarly, respondent's nominee appointed its arbitrator as Hon'ble Mr. Justice A.K. Patnaik (retired). 4. The aforesaid arbitrators appointed Justice N. Santosh Hegde, Retired Supreme Court Judge as presiding arbitrator. When the proceedings commenced, claimant no. 2 intended to come on record and it was opposed by the respondent it was ordered by the presiding arbitrator that leaving open the claimant no. 2's grievance. When things stood thus, claimant no. 1's arbitrator Mr. Ajith B. Pawar died. In this background, Applicant intends to appoint his substitute arbitrator one Mr. G.C. Tallur. This was communicated to the respondent as well as to Justice N. Santosh Hegde and Justice A.K. Patnaik. The respondent took a serious objection to the extent that Mr. G.C. Tallur cannot step into the arbitrator of applicant, as it violates para.4 of the joint memo read with agreement with the joint venture company. Even respondent opposed to implead the joint venture company. Thus, respondents did not accept the nomination of Mr.
The respondent took a serious objection to the extent that Mr. G.C. Tallur cannot step into the arbitrator of applicant, as it violates para.4 of the joint memo read with agreement with the joint venture company. Even respondent opposed to implead the joint venture company. Thus, respondents did not accept the nomination of Mr. G.C. Tallur, Former Secretary, PWD and Government of Karnataka as the nominee arbitrator. The substitution of an arbitrator will have to be only in accordance with the rules applicable. Thereafter, certain correspondence was in vogue among claimant, respondent, Presiding Arbitrator, Arbitrator of the respondent and Mr. G.C. Tallur relating to appointing Mr. Tallur as arbitrator of applicant. On 27.07.2018, respondents communicated their objection in appointing Mr. G.C. Tallur as arbitrator of applicant. The respondents have taken the following contentions before the Presiding Arbitrator which reads as under: (a) The nomination of late Mr. Ajit Pawar was done specifically with the consent of the Respondent. The consent was recorded in the Joint Memo dated 27 February 2018. The language employed in the Joint Memo at Clause 4 makes this apparent. The parties to the Joint Memo were the Claimant No. 1 and the Respondent alone. (b) The Joint Memo was taken on record by the Hon'ble High Court Karnataka on 27 February 2018 and forms part of the order passed by the Hon'ble High Court of Karnataka. The parties were directed to abide by the terms of the Joint Memo. The Hon'ble Arbitral Tribunal was thus constituted pursuant to the orders passed by the Hon'ble Karnataka High Court. (c) The procedure for constitution of the Hon'ble Arbitral Tribunal was at complete variance with the arbitration clause contained at clause 11 of the JV agreement. Presiding Arbitrator forwarded a mail which reads as under: "Dear All, in the above mater after the said demise of Mr. Pawar, the Claimant has nominated Mr. Thallur as the next arbitrator, which is opposed by the respondent hence it has become necessary for the Tribunal as it is constituted today to decide contentions raised by the parties without the participation of Mr. Thallur. For the purpose the undersigned and Justice Patnaik are willing to sit on 29th of August 5 pm. Per contra if any of the party wants to approach the High Court same may be informed to Justice Parnaik and the undersigned at the earliest. Santosh Hegde." 5.
Thallur. For the purpose the undersigned and Justice Patnaik are willing to sit on 29th of August 5 pm. Per contra if any of the party wants to approach the High Court same may be informed to Justice Parnaik and the undersigned at the earliest. Santosh Hegde." 5. Thereafter, on 29.05.2018 Presiding Arbitrator and Arbitrator of the respondent have drawn proceedings in respect of new arbitrator or applicant whether Mr. G.C. Tallur could be replaced by late Mr. Ajith Pawar as claimant nominee arbitrator or not? Having regard to the respondents objection to the extent that appointment of Shri G.C. Tallur as claimant-applicant arbitrator is impermissible. Applicant unilaterally cannot nominate their nominee. It was also contended that claimant no. 1 Applicant and claimant no. 2 nominating Mr. G.C. Tallur is not in terms of the joint memo where claimant no. 2 was not a party to the joint memo. It was further contended by the respondent that the Tribunal has become functus officio. Taking into the aforesaid contentions of claimant no. 1-Applicant, claimant No. 2 and respondent, Presiding Arbitrator held as under: "6. In view of the submissions agreed to by both the parties, that this Tribunal cannot as it exists proceed to deliberate on the issues before it. Hence, the Tribunal directs the parties to approach the Hon'ble High Court for suitable directions." 6. In view of these facts and circumstances, applicant presented I.A. No. 1 of 2018 in which it is prayed to confirm the nomination of Mr. G.C. Tallur as the applicant's nominee to the arbitration proceedings pending between the parties to the present application. 7. Learned counsel for the applicant vehemently contended that it is unfortunate that its Arbitrator Mr. Ajith B. Pawar died. Therefore, claimant no. 1-Applicant and Claimant-2 were compelled to replace him by appointing new arbitrator. In view of the above circumstance they have chosen to appoint one Mr. G.C. Tallur. Such, nomination was communicated to the respondent so also to Presiding Arbitrator Justice N. Santosh Hegde and arbitrator of the respondent Justice A.K. Patnaik. It was contended that para 4 of the joint memo empowers claimant no. 1-applicant and Claimant-2 to appoint their nominee arbitrator in a situation where arbitrator has died during the pendency of the arbitral proceedings.
Such, nomination was communicated to the respondent so also to Presiding Arbitrator Justice N. Santosh Hegde and arbitrator of the respondent Justice A.K. Patnaik. It was contended that para 4 of the joint memo empowers claimant no. 1-applicant and Claimant-2 to appoint their nominee arbitrator in a situation where arbitrator has died during the pendency of the arbitral proceedings. He relied on Section 14 and 25 of the Arbitration and Conciliation Act so also Clause 11.3 of the joint venture agreement dated 12.06.2014 read with joint memo dated 27.02.2017. In support of applicant's claim for confirmation of its nominee Mr. G.C. Tallur, he relied on a decision reported in 2016 (3) SCC 619 wherein Supreme Court relied on its earlier decision in the case of ACC Limited vs. Global Cements Limited, (2012) 7 SCC 71 (Para 17) where Section 15(2) of the Act has been interpreted relating to substation of arbitrator wherein it is observed that, even if the agreement does not specify, a new arbitrator could be appointed. In para.12 of the said decision, Supreme Court had culled out earlier 3 decisions insofar as correct conception of 15(2) of 1996 Act. Therefore, applicant is empowered to appoint his own arbitrator having regard to the demise of the then arbitrator late Mr. Ajith B. Pawar. The respondents contention to the extent that appointment of Mr. G.C. Tallur as Applicant's new arbitrator in place of late Mr. Ajith B. Pawar is not in accordance with law read with the agreement, joint memo, is not tenable. 8. Per contra, learned counsel for the respondent contended that in A.P.I.M. 01/2016 where both the parties applicant and respondent have drawn joint memo and place it before this Court for the purpose of acceptance of joint memo and to dispose of A.P.I.M. 1/2016. Accordingly it was disposed of on 20.02.2014. The said decision is binding on the parties. In the joint memo there is no whisper of claimant no. 2. Therefore, claimant no. 2 cannot come on record as a party. It was also contended that para.4 of the joint memo is crystal clear to the extent that clause 4 commences "the parties have further agreed to constitute the arbitral tribunal." Thus, applicant and respondents have specifically appointed Mr. Ajith B. Pawar and Hon'ble Justice A.K. Patniak as their arbitrator. Further those two nominated arbitrators were permitted to appoint the Presiding Arbitrator.
Ajith B. Pawar and Hon'ble Justice A.K. Patniak as their arbitrator. Further those two nominated arbitrators were permitted to appoint the Presiding Arbitrator. When in the joint memo parties have specified the persons who are to be arbitrator as their nominee, due to sad demise of Mr. Ajith B. Pawar, applicant's arbitrator died for which applicant suo-motto cannot appoint another person as its arbitrator like Mr. G.C. Tallur in the present case for the reasons that arbitral Tribunal was constituted to decide the arbitration dispute among the claimant no. 1 applicant and respondent. In the absence of conscious decision of applicant and Respondent to applicant substitute arbitrator of Applicant like Shri G.C. Thallur as desired by applicant alone, it would be contrary to agreement dated 12.06.2014 read with joint memo dated 27.2.2017 and order of this Court dated 27/02/2017 in APIM No. 1/2016. 9. Heard learned counsel for the parties. 10. The core issue in the present petition is, whether applicant can appoint his co-arbitrator suo-motto due to demise of Mr. Ajith B. Pawar, who was the then co-arbitrator of the applicant? 11. The applicant and respondent entered into joint venture operating agreement on 12.06.2014. As dispute arose among them, applicant filed petition under Section 9 of the Act read with Amendment Act 3/2016. In the said petition, applicant had sought for direction to the respondent to furnish sum of INR 46,28,54,830/- as security before this Hon'ble Court until the adjudication of the disputes made before the arbitration. During pendency of petition - A.P.I.M. No. 1/16, both applicant and respondent filed a joint memo on 27.02.2017 in which they have appointed their own arbitrator like applicant appointed Mr. Ajith B. Pawar whereas respondent appointed its co-arbitrator Hon'ble Justice A.K. Patnaik. Further, these two co-arbitrators were permitted to appoint the Presiding Arbitrator. The same was taken into consideration by this Court while recording joint memo disposed of A.P.I.M. No. 1/2016 on 27.02.2017. Thereafter, co-arbitrators of the parties appointed Justice N. Santosh Hegde as Presiding Arbitrator. During the pendency of the arbitral proceedings, Mr. Ajith B. Pawar died. Thereafter, question of proceeding with arbitral proceedings was impracticable due to non-availability of arbitrator of the applicant, Thus, applicant and claimant no. 2 proceeded to appoint one Mr. G.C. Tallur as their co-arbitrator. The question is, such nomination could be confirmed by this Court in I.A. No. 1/2018 in A.P.I.M. No. 1/2016 or not?
Ajith B. Pawar died. Thereafter, question of proceeding with arbitral proceedings was impracticable due to non-availability of arbitrator of the applicant, Thus, applicant and claimant no. 2 proceeded to appoint one Mr. G.C. Tallur as their co-arbitrator. The question is, such nomination could be confirmed by this Court in I.A. No. 1/2018 in A.P.I.M. No. 1/2016 or not? 12. Suo-Motto nomination/appointment of co-arbitrator of claimant No. 1/applicant and claimant No. 2 is required to be examined with reference to the agreement dated 12.06.2014 read with Joint Memo dated 27.02.2017 and order of this Court dated 27.02.2017. 13. In order to examine the rival contentions raised by the parties, it is useful to refer to the relevant terms and conditions incorporated in the main agreement and joint memo dated 12.06.2014 and 27.02.2017 and Judgment of this Court dated 27.02.2017. The agreement dated 12.06.2014 is required to be taken into consideration. Extract of the agreement - Para 2 relates to Constitution of the Joint Venture and 11.0 relates to Governing Laws and Dispute Resolution which reads as under: "2. CONSTITUTION OF THE JOINT VENTURE 2.1 The relationship between the Parties under this Agreement and the reason the Company was created by the Parties shall be limited to the execution and performance of contract for the Project in accordance with the terms & conditions of the Contract and this Agreement. Nothing herein shall be construed to create a general partnership or a separate legal entity or any other ongoing relationship other than that created herein between the Parties or to authorize any of the Parties or the Joint Venture to act as a general agent for any of the Parties. 11.0 GOVERNING LAWS & DISPUTE RESOLUTION 11.1 This JV Agreement shall be governed, construed and interpreted in accordance with the laws of India without giving effect to the conflicts of law provisions thereof. 11.2 If a dispute arises in the ownership Board or amongst the Parties, each party shall continued the performance of its obligations under this Agreement and shall avoid any action, which might hinder the proper performance and execution of the Contract for the Project by the JV or of the JV's obligations to the Employer.
11.2 If a dispute arises in the ownership Board or amongst the Parties, each party shall continued the performance of its obligations under this Agreement and shall avoid any action, which might hinder the proper performance and execution of the Contract for the Project by the JV or of the JV's obligations to the Employer. 11.3 All such disputes, including those considered as such by any Party, arising out of or in connection with this Agreement shall be settled amicably by the Parties at the level of the Ownership Board within 90 (thirty) days. If any dispute which could not be settled as such, shall be finally settled by a further 15 (fifteen) days prior notice by the aggrieved Party by reference of the dispute to arbitration in accordance with the Indian Arbitration & Conciliation Act (1996 Edition). The arbitration shall be held in Bangalore or elsewhere agreed by the Parties. All the arbitration proceedings shall be conducted in the English language. The award rendered following such arbitration may be entered upon in any Court of competent jurisdiction and an order obtained from that Court for its enforcement. The Parties agree not to resort to litigation while the dispute resolution process is in motion. No party shall be released from performing any of the obligations under the Agreement by reason of any dispute or difference having arisen and/or arbitration proceedings have been initiated. These provisions shall survive expiry or termination of this Agreement." Joint memo dated: 27.02.2017 reads as under: " 1. The petitioner filed the present petition under section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter the petition) before this Hon'ble Court seeking a security deposit of INR 46,28,54,830 (Forty Six Crores, Twenty Eight Lakhs, Fifty Four Thousand, Eight Hundred and Thirty Rupees) from the Respondent. The petitioner and the Respondent (hereinafter collectively, the parties) have also filed various interlocutory Applications in the Petition seeking various interim reliefs. Matters are pending consideration. Shapoorji Aecos Construction Pvt. Ltd. has filed an interlocutory Application for impleading itself in the proceedings. 2. The JV Agreement at Clause 11 contains an Arbitration Clause. The arbitration Clause is extracted below: 11.0 GOVERNING LAWS & DISPUTE RESOLUTION. 11.1 This JV Agreement shall be governed, construed and interpreted in accordance with the laws of India without giving effect to the conflicts of law provisions thereof.
2. The JV Agreement at Clause 11 contains an Arbitration Clause. The arbitration Clause is extracted below: 11.0 GOVERNING LAWS & DISPUTE RESOLUTION. 11.1 This JV Agreement shall be governed, construed and interpreted in accordance with the laws of India without giving effect to the conflicts of law provisions thereof. 11.2 If a dispute arises in the ownership Board or amongst the Parties, each party shall continued the performance of its obligations under this Agreement and shall avoid any action, which might hinder the proper performance and execution of the Contract for the Project by the JV or of the JV's obligations to the Employer. 11.3 All such disputes, including those considered as such by any Party, arising out of or in connection with this Agreement shall be settled amicably by the Parties at the level of the Ownership Board within 90 (thirty) days. If any dispute which could not be settled as such, shall be finally settled by a further 15 (fifteen) days prior notice by the aggrieved Party by reference of the dispute to arbitration in accordance with the Indian Arbitration & Conciliation Act (1996 Edition) The arbitration shall be held in Bangalore or elsewhere agreed by the Parties. All the arbitration proceedings shall be conducted in the English language. The award rendered following such arbitration may be entered upon in any Court of competent jurisdiction and an order obtained from that Court for its enforcement. The Parties agree not to resort to litigation while the dispute resolution process is in motion. No party shall be released from performing any of the obligations under the Agreement by reason of any dispute or difference having arisen and/or arbitration proceedings have been initiated. These provisions shall survive expiry or termination of this Agreement. 3. During the pendency of the present petition, the parties after discussion and in light of the Governing Laws & Dispute Resolution clause in the JV Agreement, have mutually agreed to have the present disputes referred to arbitration in accordance with clause 11.3 of the JV Agreement. In view of the above, the Petitioner does not press the above petition filed under Section 9 and both parties agree that it be so withdrawn subject to the following terms. 1. That both parties may approach the Arbitral Tribunal for appropriate orders/directions including under Section 17 of the Arbitration and Conciliation Act. 2.
In view of the above, the Petitioner does not press the above petition filed under Section 9 and both parties agree that it be so withdrawn subject to the following terms. 1. That both parties may approach the Arbitral Tribunal for appropriate orders/directions including under Section 17 of the Arbitration and Conciliation Act. 2. There is a disagreement between the parties as to whether the Shapoorji Aecos Construction Pvt. Ltd. is entitled to be impleaded in the Arbitral Proceedings. In view of the same, the application for impleading filed in these proceedings be treated as closed/withdrawn with the liberty to approach the Arbitral Tribunal for appropriate direction/orders in relation of the same. 3. All the pending applications may be dismissed as withdrawn with liberty to approach the Arbitral Tribunal. 4. The Parties have further agreed to constitute the Arbitral Tribunal as follows: 1. Mr. Ajit B. Pawar, Former Secretary PWD, Government of Maharashtra, Arbitrator as the Claimant's nominee. Address C-58, Abhimanshree Society, Off. Pashan Road, Pune-411 008. 2. Hon'ble Justice Mr. A.K. Patnaik (Retd.) Arbitrator as the Respondent's nominee. Address K-348, Hauz Khas Enclave, New Delhi-110016. The two nominated arbitrators will thereafter appoint the presiding arbitrator, preferably from Bangalore. WHEREFORE, it is most humbly prayed that his Hon'ble Court may be pleased to take the present Joint Memo on record and dismiss the present petition as withdrawn with liberty to the parties to work out their remedies before the Arbitral Tribunal as constituted in the interest of justice and equity, leaving open all contentions to be urged before the Arbitral Tribunal. 14. Order of this Court dated 27.02.2017 passed in AP.IM No. 1/2016 reads as under: "The learned counsel for the petitioner as well as counsel for respondents tender the joint memo and state that in view of the joint memo, the petition would not survive. 2. The joint memo is taken on record. 3. The learned counsel appearing for both sides and their respective clients have signed the memo and their respective clients shall abide by the terms and conditions of the joint memo. 4. In view of the above, the petition shall stand disposed of accordingly. Interim applications shall also not survive for consideration and hence the same shall also stand disposed of." 15.
4. In view of the above, the petition shall stand disposed of accordingly. Interim applications shall also not survive for consideration and hence the same shall also stand disposed of." 15. Having regard to para.11 of the agreement dated 12.06.2014 read with the joint memo and order of this Court dated 27.02.2017, it is crystal clear that parties have agreed for appointing their co-arbitrators like Mr. Ajith B. Pawar on behalf of claimant no. 1 applicant so also Justice A.K. Patnaik on behalf of the respondent. Thereafter, they were required to appoint Presiding Arbitrator and they have appointed Justice N. Santosh Hegde due to changed circumstances, during pendency of the Arbitral Proceedings that Mr. Ajith B. Pawar died. Consequently, applicant/claimant No. 1 and claimant no. 2 have no authority to appoint co-arbitrator on behalf of them as one Mr. G.C. Tallur, since neither the main agreement dated 12.06.2014 nor in the joint memo is there any clause so also in the order dated 27.02.2017 of this Court to the extent that in the event of impracticability of completion of arbitral proceedings by the appointed co-arbitrators and Presiding Arbitrator, in that event, each of the parties are entitled to appoint their own co-arbitrator, in other words substituting co-arbitrator or Presiding Arbitrator. In the absence of such a clause or Memorandum of Understanding between the parties, question of suo-motto appointing/substituting co-arbitrator of claimant No. 1/applicant is impermissible for the reason that main agreement dated 12.06.2014 read with joint memo dated 27.02.2017 and order of this Court, parties hands were tied to replace/substitute co-arbitrator. The applicant suo-motto nominating/appointing co-arbitrator on behalf of claimant no. 1/applicant could be without authority of law. No-doubt claimant no. 1/ applicant had choice of appointing his own co-arbitrator. At the same time, in the absence of any clause imposed/inserted in the main agreement dated 12.06.2014 or in the joint memo dated 27.02.2017 so also any observation of this Court in its order dated 27.02.2017, such nominating co-arbitrator and asking for confirmation of one Mr. G.C. Tallur as co-arbitrator of claimant No. 1/applicant is without any source of power. 16. Learned counsel for the applicant vehemently contended that in order to appoint his own co-arbitrator in place of the then Mr. Ajith B. Pawar and appointing Mr. G.C. Tallur is due to the changed circumstances that Mr. Ajith B. Pawar died.
G.C. Tallur as co-arbitrator of claimant No. 1/applicant is without any source of power. 16. Learned counsel for the applicant vehemently contended that in order to appoint his own co-arbitrator in place of the then Mr. Ajith B. Pawar and appointing Mr. G.C. Tallur is due to the changed circumstances that Mr. Ajith B. Pawar died. It is not that he has been replaced when he was alive. It is choice of claimant No. 1/applicant to appoint co-arbitrator or substitute of his own. In support of this contention, learned counsel for the applicant relied on the decision of the Hon'ble Supreme Court in ACC Limited vs. Global Cements Limited, (2012) 7 SCC 71 at Para-17 wherein Section 15(2) of the Act has been interpreted relating to substitution of arbitrator even to the extent that if the agreement does not specify, a new arbitrator could be appointed. In fact, Hon'ble Supreme Court has taken into consideration earlier three decisions. Therefore, the contention of the respondents that applicant cannot appoint Mr. G.C. Tallur on account of the then co-arbitrator Mr. Ajith B. Pawar as he had died during the pendency of the arbitral proceedings. In view of the aforesaid decision of the Supreme Court, clause in the agreement, joint memo would not be a hurdle. Therefore, there is no error committed by the applicant in nominating Mr. G.C. Tallur as its co-arbitrator and seeking confirmation from this Court. 17. The respondent's contention is that claimant no. 1/applicant could not go beyond the main agreement, in particularly, clause 11 read with Joint Memo submitted before this Court and order of this Court. It is a Judicial Pronouncement approving the Memo of Understanding among claimant no. 1/applicant and respondent. If there is any side track in the agreement, the joint memo and the order of this Court, applicant should have resorted to other provisions of the Act, 1996. 18. The applicant's contention is that even if the agreement does not specify relating to appointment of new arbitrator, it is permissible in terms of the decision of the Hon'ble Supreme Court in ACC Limited cases distinguishable having regard to the subsequent decision reported in between Union of India vs. U.P. State Bridge Corporation Limited, (2015) 2 SCC 52 of which Paras 15, 16 and 20 which is relevant is extracted hereunder: 15.
In the book O.P. Malhotra on the Law and Practice of Arbitration and Conciliation (3rd Edn. Revised by Ms. Indu Malhotra), it is rightly observed that the Indian Arbitration Act is also based on the aforesaid four foundational pillars. 16. First and paramount principle of the first pillar is "fair, speedy and inexpensive trial by an Arbitral Tribunal." Unnecessary delay or expense would frustrate the very purpose of arbitration. Interestingly, the second principle which is recognized in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the arbitration agreement which the parties have agreed to, that has to be generally resorted to. It is because of this reason, as a normal practice, the court will insist the parties to adhere to the procedure to which they have agreed upon. This would apply even while making the appointment of substitute arbitrator and the general rule is that such an appointment of a substitute arbitrator should also be done in accordance with the provisions of the original agreement applicable to the appointment of the arbitrator at the initial stage. Yash with Constructions (P) Ltd. vs. Simplex Concrete Piles India Ltd. However, this principle of party autonomy in the choice of procedure has been deviated from in those cases where one of the parties have committed default by not acting in accordance with the procedure prescribed. Many such instances where this course of action is taken and the Court appoint the arbitrator when the persona designate has failed to act, are taken note of in paras 6 and 7 of Tripple Engg. Works. We are conscious of the fact that these were the cases where appointment of the independent arbitrator made by the Court in exercise of powers under Section 11 of account of "default procedure." We are, in the present case, concerned with the constitution of substitute Arbitral Tribunal where earlier Arbitral Tribunal has failed to perform. However, the above principle of default procedure is extended by this Court in such cases as well as clear from the judgment in Singh Builders Syndicate. 20. In the present case, we find the fact situation almost same as in Tripple Engg. Works and Singh Builders Syndicate.
However, the above principle of default procedure is extended by this Court in such cases as well as clear from the judgment in Singh Builders Syndicate. 20. In the present case, we find the fact situation almost same as in Tripple Engg. Works and Singh Builders Syndicate. If the contention of the appellant is allowed, it would amount to giving premium to the appellant for the fault of the Arbitral Tribunal's members who were appointed by none else but by the appellant itself. As pointed above, the appellant has not questioned the order of the High Court insofar as it has terminated the mandate of the earlier Arbitral Tribunal because of their inability to perform the task assigned to them. In such a situation, leaving the respondent at the mercy of the appellant thereby giving the power to the appellant to constitute another Arbitral Tribunal would amount to adding insult to the serious injury already suffered by the respondent because of non-conclusion of the arbitral proceedings even when the dispute was raised in the year 2007. In case, the cherished and benevolent purpose and objective of speedy resolution of the disputes by arbitral proceedings is to be accomplished, it becomes the bounden duty of the persona designate to appoint such arbitrators who have sufficient time at their disposal to attend to this task assigned to them and to conclude the arbitral proceedings in a speedy manner. It is a common sight that the officers who are awfully busy in their other routine functions, because of their status and position, are made arbitrators. For them discharge of their other duties assumes more importance (and naturally so) and their role as the arbitrators takes a back seat. This kind of behaviours showing casual approach in arbitration cases is anathema to the very genesis of arbitration. Therefore, where the Government assumes the authority and power to itself, in one-sided arbitration clause, to appoint the arbitrators in the case of disputes, it should be more vigilant and more responsible in choosing the arbitrators who are in a position to conduct the arbitral proceedings in an efficient manner, without compromising with their other duties.
Therefore, where the Government assumes the authority and power to itself, in one-sided arbitration clause, to appoint the arbitrators in the case of disputes, it should be more vigilant and more responsible in choosing the arbitrators who are in a position to conduct the arbitral proceedings in an efficient manner, without compromising with their other duties. Time has come when the appointing authorities have to take call on such aspects failing which (as in the instant case), Courts are not powerless to remedy such situations by springing into action and exercising their powers as contained in Section 11 of the Act to constitute an Arbitral Tribunal, so that interest of the other side is equally protected. 19. Sections 14 Failure or impossibility to act, 15 Termination of mandate and substitution of arbitrator and 32 Termination of proceedings of the Act, 1996 is required to be taken into consideration to decide, whether claimant-applicant can nominate/ appoint one Mr. G.C. Tallur as its co-arbitrator suo-motto and seek confirmation from this Court? The applicant has no right to appoint suo-motto a co-arbitrator in the changed circumstances since, there is no specific clause in the agreement dated 12.06.2014 so also in the joint memo or any observation made by this Court while disposing A.P.I.M. No. 1/2016 on 27.02.2017 to the extent of reserving right of the parties in the event of any death or impracticable to hold arbitral proceedings in terms of joint memo, One must go by main agreement (Rule). In the present application, applicant so also respondent were bound by Clause 11 of the agreement dated 12.06.2014 read with Joint Memo and Order of this Court. Thus, the cited decision in the case of ACC Limited is distinguishable and not applicable. Moreover, the applicant has not pointed out any source of power relating to suo-motto nominating or appointing its co-arbitrator and further, seeking confirmation of such an action on claimant no. 1/applicant. Even looking at para 2, 2.1 and 11.3 of the agreement, it is evident that, "parties have entered into agreement and there is no specific Clause 'party'. In the absence of specific clause to the extent that party can appoint his own co-arbitrator, applicant/claimant no. 1 has no choice of appointing his own co-arbtirator. Therefore, rightly respondent had raised objection that without consent of the respondent suo-motto co-arbitrator appointment or substituting co-arbtirator by the applicant would be impermissible.
In the absence of specific clause to the extent that party can appoint his own co-arbitrator, applicant/claimant no. 1 has no choice of appointing his own co-arbtirator. Therefore, rightly respondent had raised objection that without consent of the respondent suo-motto co-arbitrator appointment or substituting co-arbtirator by the applicant would be impermissible. We are only concerned with the authority or power of the claimant No. 1 applicant. By our analysis, we are obligated to arrive at the conclusion that once the appointed co-arbitrator seizes by operation of law, applicant cannot suo-motto nominate or appoint new/substitute co-arbitrator in the absence of source of power under any rule agreement. 20. Having regard to the facts and circumstances, claimant no. 1/applicant has not made out a case so as to entertain I.A. No. 1/2018 in A.P.I.M. No. 1/2016 in confirming nomination of Mr. G.C. Tallur as the applicant's nominee to the arbitral proceedings. Hence, application stands rejected.