JUDGMENT R.C. Jain, J.
1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act') seeking the appointment of an Arbitrator to adjudicate upon the claims of the petitioner.
2. The application has been made with the averments and allegations that the parties entered into a contract for the work ''upgradation and shifting of electrical sub-stations at State Bank of India, L.H.O at 11, Sansad Marg, New Delhi'', the total value of the contract being Rs.2,56,30,773.35p. The said contract between the parties contained an arbitration agreement in clause-45 of the conditions of contract or settlement of disputes/differences between the parties, which is to the following effect:-
''All disputes or difference of any kind whatsoever, which shall at any time arise between the parties hereto achieve or concern. The works or the execution or maintenance thereof this contract or the rights touching or concerning the works or the execution of maintenance thereof this contract or the rights touching or concerning the works or the execution of maintenance thereof this contract or concerning the works or the execution of maintenance thereof this contract or concerning the works or concerning the work or execution of maintenance thereof this contract or the construction remaining operation or effect thereof to the rights or liabilities of the parties or arising out or in relation thereof whether during or after determination, fore closure or branch of the contract (other than those in respect of which the decision of any person by the contract expressed to the final and binding) shall after written notice either by the party to the contract to the either of then and to employer hereinafter provided.
For the purpose of appointing the sole Arbitrator referred to above the employer will send within 30 days of the receipt of the notice, to the contractor a panel of 3 names of persons within 30 days of the receipt of notice, to the contractor a panel of 3 names of persons who shall be presently unconnected with the organisation for which the work is executed.
The contractor shall on receipt of the names as aforesaid select any one of the persons named to be appointed as a sole arbitrator and communicate his name to the employer within 30 days of the receipt of names. The employer shall thereupon without any, appoint the said person as the sole Arbitrator. If the contractor fails to communicate such selection as provided above within the period specified, the Competent Authority shall make the selection and appoint the selected person as the sole Arbitrator.
If the employer fails to send to the contractor the panel of 3 names as aforesaid within period specified, the contractor shall send to the employee a panel of three names of persons who shall all be unconnected with either party. The employer shall on receipt of the names as aforesaid select any one of the persons named and appoint him as the sole Arbitrator within 30 days of receipt of the panel and inform the contractor accordingly. The contractor shall be entitled to appoint one of the persons from the panel as a sole Arbitrator, and communicate his name to the employer.
If the Arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole Arbitrator shall be appointed as aforesaid.
The work under the contract, shall however continue during the arbitration proceedings, and no payment due or payable to the contractor shall be withheld on account of such proceedings.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of first hearing.
The Arbitrator may from time to time, with consent of the parties, enlarge time for making and publishing the Award.
The Arbitrator shall give a separate award in respect of each dispute or difference referred to him. The arbitrator shall decide each dispute in accordance with the terms of the contract, and give a reasoned Award. The venue of Arbitrator shall be such place as may be fixed by the Arbitrator in his sole discretion.
The fees, if any of the Arbitrator, shall, if required to be paid before the Award made and published, be paid half and half by each of the parties. The costs of the reference and of the Award including the fees, if any, of the Arbitrator who may direct to and by whom, and in what manner, such costs or any part thereof shall be paid and may fix or settle and amount of costs to be so paid.
The Award of the Arbitrator shall be final and binding on both the parties. Subject to above said the provisions of Arbitration Act, 1940 or any statutory modification or re-enactment thereof, and the Rules made there under shall apply to the arbitration proceedings under this Clause.
The employer and contractor hereby also agree that Arbitration Clause shall be a condition precedent to any right to action under the contract with regard to the matters, hereby agreed to be so referred to Arbitration.''
3. The case of the petitioner is that the petitioner submitted four running bills for Rs. 55,03,533/- out of which first and second running bills were paid while the payment of third and fourth running bill amounting to Rs.29.9 lacs was illegally withheld by the respondent. The respondent is also stated to have withheld security amount of Rs.9.8 lacs. It is alleged that the disputes have arisen between the parties and huge amounts of the petitioner became due up to third and fourth running bills. So the petitioner filed an earlier petition, being AA 49/02 under Section 11(6) of the Act. However, the same was withdrawn by the petitioner and was dismissed as such on the assurance of the respondent to reconcile and settle the disputes between the parties. No reconciliation or settlement could take place and so vide letter dated 18.12.2003, the petitioner called upon the respondent to pay and clear the amount due within 7 days and forwarded the panel of three names in order to select one out of them to act as Arbitrator for adjudication of disputes within 30 days of the letter as provided in clause 45 of the terms and conditions of the contract. The respondent having failed to act on that letter and to give a panel of three names, the petitioner filed the present petition on 24.3.2004
4. The petition is opposed on behalf of the respondent and a reply has been filed raising preliminary objections about the petition having become infructuous on the premises that vide a letter dated 12.4.2000, the respondent Bank advised the petitioner names of three Arbitrators and vide letter dated 21.4.2004, the petitioner had accepted Justice H.L.Aggarwal, former Chief Justice of Orissa High Court as the sole Arbitrator and the sole Arbitrator has already accepted the reference and fixed the matte for 18.8.2004 for preliminary consideration. It is also stated that the petitioner has not approached this Court with clean hands and has no right or outstanding claim against the respondent Bank. It is alleged that the petitioner is guilty of causing delay in completion of the project and that the petitioner had already been paid an amount of Rs.2.25 crores against total cost of the project of Rs.2,56,30,773.35p, therefore, there is no question of the petitioner staking claim worth Rs.3,78,17,516/. It is denied that the petitioner is entitled to seek the appointment of an Arbitrator within the meaning of Section 11(6) of the Act.
5. I have heard Mr. Raman Kapoor, learned counsel representing the petitioner and Mr. S.L. Gupta, learned counsel for the respondent and have given my thoughtful consideration to their respective submissions. The nature and scope of the proceedings under Section 11 of the Arbitration Act and the powers of the Chief Justice or his designate have been considered by the Supreme Court in the case of Konkan Railways Corporation Limited and Another Vs. Rani Construction Pvt. Ltd, . In the said case the Apex Court clearly laid down that there is nothing in Section 11 of the Arbitration and Conciliation Act, 1996 that requires a party other than the party making the request to be even noticed and it does not contemplate a response from the other part. The Apex Court further held that appointment of arbitrator by the Chief Justice or his designate is not a judicial function resulting in an adjudicatory order. Further, that Section 11 does not contemplate a decision on any controversy between the parties. It further held that the Chief Justice or his designate has to make the nomination of an arbitrator only if the period of 30 days is over does not lead to the conclusion that the decision to nominate is adjudicatory. While disposing of an application under Section 11 containing an averment that the said period has passed, the Chief Justice or his designate has to make the appointment of an arbitrator. This is additionally for the reasons that Section 16 of the Act empowers the Arbitral Tribunal to rule on its jurisdiction and the expression ''that the Arbitral Tribunal may rule on any objections with respect to the existence or validity of the arbitration agreement'' shows that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction, but goes to the very root of its jurisdiction. It is, therefore, open for any party to challenge before the Arbitral Tribunal that it had been wrongly constituted.
6. In the case in hand, the parties have not disputed the existence of an arbitration agreement as also the disputes arising out of the contract and, therefore, there is no escape from the conclusion that the disputes/differences arising between the parties are required to be referred and settled through arbitration. Learned counsel for the respondent has, however, urged that since an Arbitrator has already been appointed and has entered the reference, the present petition is infructuous and no new Arbitrator needs to be appointed. On the other hand, Mr. Raman Kapoor contended that the proposal to appoint Justice H.L. Aggarwal was initiated by the respondent only on 12.4.2004, i.e after the filing of the present petition and, therefore, the respondent has forfeited its right to appoint an Arbitrator and the petitioner is entitled to seek appointment of an independent Arbitrator through the Court. In support of his submissions, he has relied upon Supreme Court decision in the case of Datar Switchgears Lt. Vs. Tata Finance Ltd. and Another, 2000(3) Arb.LR 447 (SC). In that case, the Supreme Court held that 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 the 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.
7. Having regard to the legal position flowing from the above judgment, there is no escape from the conclusion that the respondent has forfeited its right to supply a panel of proposed Arbitrators for acceptance of the petitioner. In the opinion of this Court, the application deserves to be allowed and the Arbitrator needs to be appointed for settlement of the disputes/differences between the parties.
8. In the result, the application is allowed and Mr. Justice H.C. Goel, a retired Judge of this Court, B-504, New Friends Colony, New Delhi-110065 (Ph.Nos.26843378 and 26842203) is appointed as the sole Arbitrator to settle the disputes/differences between the parties including the claims referred to in para 8 of the petition. The Arbitrator shall enter upon the reference and make his award as expeditiously as it may be practicable. He shall be entitled to fix his own remuneration, which shall be payable by both the parties in terms of the arbitration agreement. Parties are directed to appear before the named arbitrator on 9th October, 2004 at 11.00 A.M. A copy of the order be sent to the named arbitrator forthwith.