ORDER S.K. Mahajan, J.
1. This order will dispose of this Petition and 332 connected Petitions filed under Section 11(6) of the Arbitration & Conciliation Act, 1996. It is agreed by all the parties that the agreement under which the matter is sought to be referred to the arbitrator is the same in all the cases. Facts in short, relevant for decision of these matters, are :
2. The parties had entered into an agreement for milling of rice. Under the Agreement there was an arbitration clause which was as under :
"21. ARBITRATION All disputes or differences whatever existing between the parties out of or relating to the agreement meaning and operation or effect of this agreement or the breach thereof shall be settled by arbitration in accordance with the rules of arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. The Sr. Regional Manager/Zonal Manager of the Corporation shall appoint/nominate arbitrator out of the persons in the panel of arbitrators maintained by ICA. It is a term of this contract that in the event of the arbitrator being transferred, vacation of office, death or inability shall appoint another person out of panel maintained by ICA to act as arbitrator. Such person shall be entitled to proceed with reference from the stage where it was left by his predecessor.
Provided further that any demand for arbitration in respect of any claim(s) of the Miller, under the contract shall be in writing and made within one year of the date of completion of expiry of the period of contract. If the demand is not made within the period, the claim(s) of the Millers shall be deemed to have been waived off and absolutely barred and the Corporation shall be discharged and released of all liabilities under the contract in respect of these claims.
The costs of the proceedings in connection with arbitration shall be in the discretion of the arbitrator who may make suitable provision for the same in his award."
3. Certain disputes having arisen between the parties the matter was sought to be referred to the Arbitrator. Food Corporation of India, (hereinafter referred to a the Corporation) therefore, wrote to the Indian Council of Arbitration (hereinafter referred to as the Council) on February 26, 1998 to appoint an Arbitrator in terms of the Rules of the Council. The Council, however wrote a letter on March 4, 1998 to the petitioner stating inter alia that they should get an agreement, as referred to in the said letter, signed between the parties and it is only on the receipt of the agreement that the Council will proceed further in the matter. The agreement, according to the Council, should reach them on or before April 15, 1998.
4. It appears that Director, Ministry of Commerce, Udyog Bhawan had also written a letter to the Council to appoint an Arbitrator in the matter of disputes between the parties. In reply to that letter the Council on March 10, 1999 informed the Director in the Ministry of Commerce, that the arbitral tribunal derives its jurisdiction from the agreement of reference. Lack of inherent jurisdiction in the arbitral tribunal goes to the root of the matter and vitally affects its power to adjudicate upon the dispute between the parties. It was also stated in this letter that when there was no valid submission to the Arbitrator the matter relating to the contracts cannot go to arbitration and award on that basis was without any legal validity. According to the Council the clause adopted by the F.C.I. in the agreement with the Millers was in conflict with the standard clause of the Council and also relevant rules and procedure of the Council. In view of that the Council suggested that both parties should make an application to the Council adopting standard clause without any departure and on receipt of the consent directly from each party for each specific case the Council will process the matter as per its own rule as per each case.
5. As the matter was not referred to arbitration and the Council wanted consent of both the parties before any Arbitrator could be appointed in terms of the rules of the Council, this petition came to be filed by the F.C.I. under Section 11(6) of the Arbitration & Conciliation Act for appointment of an Arbitrator.
6. On a plain reading of the agreement it appears to the Court that the Arbitrator was to be appointed by the F.C.I. and not by the Council. The petitioner was, therefore, called upon to address arguments on the question as to how the petition was maintainable.
7. Under Section 11(6) of the Act where, under an appointment procedure agreed upon by the parties a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice of the High Court to take the necessary measure, unless the agreement on the appointment procedure provided other means for securing the appointment. The question, therefore, before the Court is as to whether the procedure prescribed in the agreement requires the Council to appoint an Arbitrator and if so, whether the Council has failed to perform this function allegedly entrusted to it?
8. Mr. Sanghi, learned Senior Advocate appearing for the petitioner submits that the agreement provides settlement of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and, therefore, the Arbitrator has to be appointed in accordance with the Rules of the Council and in no other manner. He submits that under Rule 20 of the Rules of the Council, on receipt of the application for arbitration, the Registrar of the Council shall take necessary steps to have the Arbitral Council constituted for adjudication of the disputes or differences.
9. Rules 20 to 22 and 37 which have been referred to by Mr. Sanghi, being relevant for appointment of an arbitrator under the Rules of the Council are as under :
CONSTITUTION OF THE BENCH
20. On receipt of the application for arbitration, the Registrar shall take necessary steps to have the Bench constituted for this adjudication of the dispute or difference as provided hereunder:
21. The number of arbitrators to hear a dispute shall be either one or three to be determined as under :
(a) Where the claim does not exceed Rs. 25 lakh, and where the arbitration agreement does not specify three arbitrators the reference shall be deemed to be to a sole arbitrator, unless the Parties to the dispute agree to refer the dispute to three arbitrators within thirty days from the date of notification of request for arbitration or within such extended time or where the Registrar in his discretion thinks that an adjudication by three arbitrators is preferable in the particular case.
(b) Where the claim exceeds Rs. 25 lakh, the dispute will be heard and determined by three arbitrators, unless the Parties to the dispute agree to refer the dispute to a sole arbitrator within thirty days from the date of the notification of the request for arbitration or within such extended time.
(c) Where three arbitrators have to be appointed as per the above sub-rule and any of the Parties to the dispute fails to make the necessary deposit toward the cost and expenses of arbitration, instead of three arbitrators, the Registry may appoint a sole arbitrator, irrespective of the value of the claim.
22. The appointment of sole arbitrator or three arbitrators shall be made in the following manner :
(a) In case a sole arbitrator has to be appointed, the Registrar shall call upon the Parties to the dispute to forward the name of an agreed arbitrator from among the Panel of Arbitrators by a notice in writing, sent to them. The said notice shall specify the period within which the nomination shall be made which shall not be less than thirty days from the date of the said notice to the respective Parties. If the Parties fail to agree on the person to be appointed as sole arbitrator within the time granted by the Registrar, the Registrar in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman, appoint the sole arbitrator from among the Panel of Arbitrators. If one of the Parties is a national or resident of a country other than India, the sole arbitrator shall as far as possible be chosen or appointed by the Registrar from among the nationals of a country other that, that of any of the Parties. The sole arbitrator, so nominated shall constitute the Bench to hear the dispute and shall be appointed as such in writing by the Registrar. The Registrar shall give notice to the Parties of the constitution of the Bench.
(b) Where the reference is to three arbitrators, the Registrar shall in the first instance call upon the Parties to the dispute to nominate one arbitrator each from among the Panel of Arbitrators by a notice in writing, sent to them. The said notice shall specify the period within which the nomination shall be made which shall not be less than twenty-one days from the date of the said notice to the respective Parties.
If a party to the dispute refuses or neglects to appoint an arbitrator on his behalf within the period specified or any extended period or if he requests the Registrar to nominate an arbitrator on behalf of that Party from among the persons then constituting the Panel of Arbitrators in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman. On receipt of the nominations from the respective Parties or on the appointment as aforesaid by the Registrar, the Registrar shall appoint another person in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman, from among the Panel of Arbitrators to be an additional arbitrator.
If one of the Parties is a national or resident of a country other than India, the additional arbitrator shall as far as possible be chosen or appointed from among the nationals of a country other than that of any of the Parties. The arbitrators so nominated or appointed shall constitute the bench and shall be appointed as such in writing by the Registrar. The additional arbitrator nominated by the Registrar shall be the Chairman of the Bench. The Registrar shall give notice to the parties of the constitution of the Bench.
37. The Registrar shall send copies of all papers, claim statement, defense statement, counter-claims, replies, statement, documents etc. received from the Parties to the dispute to the Arbitrator/Arbitrators constituting the Bench under Rule 21 with a request to proceed with the arbitration and the Bench shall be deemed to have entered on the reference on the day on which applications, defense statement, counter claims, replies, documents, etc. have been dispatched to the Arbitrator/Arbitrators. Intimation shall be given to the Parties of the day on which the Bench is deemed to have entered on the reference.
If the Claimant does not file all the requisite document, papers information, etc. or does not deposit the appropriate Fee as per the Rules after having been given due opportunity for the purpose by the Registrar or the Bench, the Registrar or the Bench may dismiss/close the case on file for lack of perusal by the Claimant.
Similarly, if the Defendant, fails to produce any requisite documents, papers or information or fails to deposit Arbitration Fees, etc. after having been given due opportunity for the purpose by the Registrar or the Bench, the Registrar or the Bench may proceed further with the arbitration proceedings as per the Rules, notwithstanding such failure or refusal by the Defendant."
10. Under Rule 20 on receipt of the application for arbitration, the Registrar is required to take steps to have the arbitral tribunal constituted for adjudication of the disputes. Under Rule 21 the number of arbitrators to hear the dispute is determined. Where the claim does not exceed Rs. 25 lacs and where the arbitration agreement does not specify three or more arbitrators, the reference will be to a sole arbitrator. Where the claim exceeds Rs. 25 lacs the dispute will be heard and determined by three arbitrators unless parties to the dispute agree to refer the dispute to a sole arbitrator within thirty days from the date of the notification of the request for arbitration. Where three arbitrators have to be appointed and any of the parties to the dispute fails to make necessary deposit towards cost and expenses of arbitration, instead of three arbitrators, the Registarar may appoint a sole arbitrator, irrespective of the value of the claim. Under Rule 23 the manner in which the appointment of sole arbitrator or three arbitrators is made is prescribed.
11. In the present case, the reference is to be to a sole arbitrator. Under Rule 22 in case the sole arbitrator has to be appointed the Registrar shall call upon the parties to the dispute to forward the name of an agreed arbitrator from among the Panel of Arbitrators by a notice in writing sent to them. The said notice shall specify the period within which the nomination shall be made which shall not be more than 30 days from the date of the said notice to the respective parties. If the parties fail to agree on the person to be appointed as sole arbitrator within the time granted by the Registrar, the Registrar in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman appoint the sole arbitrator from among the Panel of Arbitrators. Under Rule 37 the Registrar is required to send copies of all papers relating to arbitration such as claim statement, defense statement, counter claims, replies, statement and other documents received from the parties to the dispute to the arbitrator constituting the arbitral tribunal under Rule 21 with a request to proceed with the arbitration and the arbitral tribunal shall be deemed to have entered the reference on the date on which applications, defense statement, counter claims, replies documents etc. have been despatched to the arbitrator. The procedure is also prescribed as to how the arbitrator is to deal with the matter in case of failure of any of the parties to produce the documents or other necessary information.
12. Thus, it is to be seen that under Rule 22(a) where a sole arbitrator is to be appointed it can be appointed only with the consent of the parties. On such consent having not been given the power is given to the Registrar in consultation with the Chairman of the Committee to appoint an Arbitrator. This rule is in direct conflict with the arbitration agreement entered into between the parties. Under the agreement entered into between the parties the power has been given to the Senior Regional Manager/Zonal Manager of the Corporation to appoint/nominate the arbitrator out of the persons in the Panel of Arbitrators maintained by the Council. The other party to the agreement has no role to play in the appointment of the arbitrator. It was in this context that the Council had written to the petitioner, and in my view rightly, to forward the consent of the other party so as to proceed with the appointment of arbitrator. Rules 21 and 22 will not be applicable unless both the parties agree to the Council appointing an arbitrator.
13. In my opinion, the arbitrator agreement is in three parts, namely : (1) in case of disputes the matter will be referred to an arbitrator to be appointed by the Senior Regional Manager/Zonal Manager; (2) the Arbitrator will be appointed from out of the Panel of Arbitrators maintained by the Indian Council of Arbitration; and (3) the Arbitrator so appointed will arbitrate upon the disputes between the parties, in accordance with the procedure laid down for conduct of arbitration under the Rules of the Indian Council of Arbitration. That is the only way to read the agreement harmoniously with the Rules of the Indian Council of Arbitration. Once power has been given to the Senior Regional Manager Zonal/Manager of the Corporation to appoint nominate an arbitrator, no power could be given to the Indian Council of Arbitration to appoint the Arbitrator. It was, therefore, wrong, if the disputes had been registered as alleged by the petitioner, in the first instance, on the part of the ouncil to register any dispute between the parties. It is only after an arbitrator has been appointed by the Corporation in terms of the agreement between the parties from out of the Panel of Arbitrators maintained by the Indian Council of Arbitration that the procedure as to how the arbitration has to be conducted by such arbitrator will be followed. Before the appointment of the arbitrator the Rules of the Indian Council of Arbitration were not required to be followed. However, once an Arbitrator is appointed by the Senior Regional Manager/Zonal Manager of the Corporation in accordance with the agreement between the parties it will not be open for the Indian Council of Arbitration to say that such arbitrator cannot proceed with the arbitration under the Rules of the Council unless consent for such appointment is obtained afresh from both the parties.
14. Under Section 11(6) of the Act it is only on the failure of the party to act as required under the procedure agreed to by the parties, that a request may be made to the Chief Justice of the High Court or any person designated by him to take necessary measure for the appointment of an arbitrator. Unless there is a failure to act in accordance with the procedure agreed to by the parties, in my opinion, no application requesting the Court to take measures to appoint an arbitrator would be maintainable. As already seen, in the present case, the procedure agreed to by the parties, was that the arbitrator shall be appointed/nominated by the Senior Regional Manager/Zonal Manager of the Corporation. In place of following that procedure, the Corporation requested the Council to appoint an arbitrator, which request was rightly denied by the Council. Thus, there was no failure to act on the part of the Council as that was not the procedure agreed to by the parties. Precondition for request in the Court to take measures for the appointment of the arbitrator having not been fulfillled, in my view, the petition under Section 11(6) of the Act is not maintainable and it is held accordingly.
15. With the above observations, the petition is disposed of with no order as to costs.