HON'BLE SRI JUSTICE A.RAJASHEKER REDDY
ARBITRATION APPLICATION Nos.132, 133 and 134 OF 2014
COMMON ORDER:
Since the issue involved in all these Arbitration Applications
is one and the same, they are being heard together and disposed
of by way of this Common Order.
2. These Arbitration Applications are filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 (for short 'the Act') for
appointment of an Arbitrator to resolve the disputes that arose between
the parties in respect of different works under separate Sub Contract
Agreements dated 30.07.2012 in all these Arbitration Applications.
3. For the sake of convenience, the facts in Arbitration Application
No.132 of 2014 are considered for disposal of these Applications. Brief
facts which are necessary for disposal of the Arbitration Application are
as follows:
The respondent was awarded a work pertaining to Sardar
Sarovar Narmada Nigam Limited for the Design, Construction, Testing, Commissioning and operation and Maintenance for five years of Kutchh Branch Canal Package-I on Engineering, Procurement, Construction and Commissioning (EPC) basis between Ch.82.300 kms to Ch.112.50 kms including earthwork, structures, lining, service road, CR/HR/Escape, Gates, Stop Locks, Control Cabins etc., by Executive Engineer, Sardar Sarovar Narmada Nigam Limited, vide agreement No.KBC/EPC/Package/1/EPC-I of 2011-2012, dated 07.02.2011. The respondent sub-contracted a portion of the work i.e.,98.00 km to 100.100 km, which forms part of the above mentioned package awarded by Executive Engineer, Sardar Sarovar Narmada Nigam Limited on item rate work basis including materials vide Sub-Contract 2 Agreement dated 30.07.2012 (for short 'SCA'), which is valued at Rs.36,51,64,687.58 ps and as per the said agreement, the work shall be completed on or before 30.07.2013. Pursuant to the award of the contract, the applicant had mobilized its men and machinery in right earnest so as to execute the work under SCA and complete the execution before the designated date. However, for the reasons which are beyond the control of the applicant and for the reasons attributable to the respondent, the entire planning schedule of the applicant got disturbed and thus the execution of the work got unduly delayed. The issues that are encountered by the applicant while executing the work have been brought to the notice of the respondent for resolving the same so as to complete the work within the time schedule, but in vain. The subject work could not be progressed due to frequent obstructions by the Forest Department and though the same was brought to the notice of the respondent for it's intervention, they turned a deaf ear, as such, the work got unduly delayed. That apart, the respondent failed to pay amounts under RA Bills, which were raised from time to time. Thereafter, the Applicant was constrained to address letter No.SRRCIPL/KBC.PKG.1/2014-15/No.73, dated 11.08.2014 demanding an amount of Rs.16,79,13,904/- along with interest at 18% per annum. As disputes arose between the applicant and the respondent, the applicant got issued notice dated 28.07.2014 invoking arbitration clause No.34 contained under the SCA dated 30.07.2012 for settlement of claims amicably in the first place and to take further suitable action i.e., appointing an Arbitrator, if they failed to agree for any amicable settlement. In response thereto, the respondent replied through letter vide Ref.No.NCC/HO-Irri/KBC Pkg-I/SRRC/2014-15/07, dated 08.08.2014 stating that the claims raised by the applicant are beyond the ambit of the contract and that same are excepted matters 3 and there are no disputes existing for the purpose of any settlement. Thereafter, the respondent called upon the applicant for amicable settlement on 14.08.2014 to resolve the issues, if any, within the ambit of the contract. On receipt of the said letter, the applicant addressed letter dated 10.08.2014 requesting the respondent to give details of the meeting, to which the respondent replied through letter dated 12.08.2014 giving the particulars and also named the authorized representative i.e., S.Srinivasa Rao, AGM, Irrigation. As the person proposed is far less in hierarchy than Mr.B.A.N.Raju, Vice President, the applicant addressed letter dated 14.08.2014 expressing reservations as regard the said nominated person. On 14.08.2014, the applicant represented by its Managing Director attended the meeting. While reiterating their stand in the letter dated 08.08.2014, the respondent called upon the applicant to come up with fresh proposal in terms of the contract. In the said meeting, the disputes/claims raised by the applicant through letter dated 11.08.2014 was also considered. As the respondent was not willing to consider the claims of the applicant, the applicant requested the respondent to appoint an arbitrator for resolving the disputes raised by the applicant in their letter dated 11.08.2014. Thus, the so called amicable settlement fell through, as such, the respondent ought to have appointed arbitrator and that instead of appointing an Arbitrator, the respondent addressed letter dated 16.08.2014 fixing a fresh date of meeting as 23.08.2014 falsely alleging that the applicant agreed to submit a reasonable proposal within the terms of the agreement. The applicant represented by its Managing Director attended the meeting on 23.08.2014 to question the same and also to discuss if there would be any consideration of the issues raised by them in respect of two other contracts. However, on the said date, almost a new team has come to 4 the meeting and they reiterated their stand taken in their letter dated 08.08.2014 for all the works/contracts, which are under execution by the applicant, thereby refusing to entertain the said issues. Subsequently, there is exchange of correspondence between the parties. As the respondent did not come forward to appoint an Arbitrator as requested by the applicant vide letter dated 11.08.2014, this Application is filed.
4. Counter affidavit is filed by the respondent denying the averments in the affidavit filed in support of the Arbitration Application stating that application filed by the applicant is liable to be dismissed in limine on the ground that; a) the Application is premature as it is filed within 30 days and b) the Application is not maintainable either in law or on facts and same has become infructous. That the claim of the applicant for Rs.16,79,13,904/- along with interest at 18% per annum is exorbitant and beyond the ambit of the SCA dated 30.07.2012. It is asserted that the applicant by letter dated 10.08.2014 acknowledged the receipt of letter dated 08.08.2014 and had given consent for the amicable settlement as provided under Clause 34 of the SCA. Accordingly, on 14.08.2014, a meeting was held between the representatives of the applicant and the respondent at the office of respondent and that after discussions, it was agreed that the applicant would submit a reasonable proposal for settlement of issues on or before the next meeting i.e., on 16.08.2014. However, the scheduled meeting was rescheduled to 23.08.2014. On the said date, a second meeting was held between the representatives of the applicant and the respondent at the office of the respondent. The applicant submitted a settlement proposal for which, the respondent requested for some time to review ad revert with their views. On 03.09.2014, the respondent addressed a letter to the applicant and informed that settlement 5 proposal submitted by the applicant was not agreeable to the respondent as the excess amount of Rs.2,23,98,021/- proposed by the applicant was already paid. The respondent vide letter dated 03.09.2014 expressed its intent to appoint a Sole Arbitrator under Clause 34 of the SCA for adjudication of all the claims and counter claims of the parties. Thereafter, the respondent addressed a letter dated 05.09.2014 to Mr.Inder Mohan Singh, who retired as Chief Engineer seeking his consent to act as an Arbitrator to arbitrate on the dispute between the parties. On 15.09.2014, Mr.Inder Mohan Singh addressed a letter to the respondent wherein he confirmed his willingness to act as a Arbitrator to arbitrate the dispute between the parties. On 22.09.2014, the respondent prepared a draft letter to be issued to the Applicant informing the appointment of Arbitrator and the said letter was internally circulated to the officers of the respondent for their approval by e mail. Pursuant to the letter dated 03.09.2014, the respondent vide letter dated 22.09.2014 intimated to the applicant that the respondent had appointed Mr.Inder Mohan Singh as Sole Arbitrator under the Clause 34 of the SCA and said letter was emailed to the applicant with a copy marked to the Arbitrator on 23.09.2014 and hard copy of the said letter was dispatched on the same day through Courier and was received by the applicant on 24.09.2014. The respondent is not aware of the fact of the applicant approaching this Court under Section 11(6) of the Act praying for an appointment of an Arbitrator. On the next day i.e., 23.09.2014 at 5.27 pm, the respondent received a letter from the counsel for the applicant informing the respondent about filing of present Application praying for an appointment of Arbitrator. The present Application has been filed before the completion of the 30 days period as required under Section 11(5) of the Act from the date of intimation by respondent about failure of the amicable 6 settlement and that the respondent would appoint an Arbitrator as per Clause 34 of the Sub-Contract Agreement. From September 2nd, 2014 i.e., from the date of filing of the present application till 23.09.2014 on receipt of notice dated 21.09.2014 from the counsel appearing for the applicant, the applicant deliberately suppressed the fact that the applicant had filed an application before this Court. In response to the letter dated 22.09.2014 intimating the applicant about appointment of Mr.Inder Mohan Singh as Sole Arbitrator, the applicant sent a reply letter dated 25.09.2014 to the respondent and informed about filing of present Application and disputed the appointment of the Arbitrator by the respondent. The sole Arbitrator appointed by the respondent meanwhile fixed a Schedule for Arbitration and issued the same to both the parties for further action. There is no specific request to the respondent for appointment of Arbitrator consequent to failure of amicable settlement and that there is no such time limit prescribed under Clause 34 of the SCA. The relief sought for by the applicant cannot be granted as the entire Application is misconceived and has become infructous. The applicant even without making a request for appointment of Arbitrator as contemplated under Clause 34 of the SCA, with a malafide intention approached this Court, even before expiry of 30 days as provided for under Section 11 of the Act. Since the respondent had already appointed Arbitrator under Clause 34, this Application is infructous and requires to be dismissed. In Datar Switchgears Limited v. Tata Finance Limited [2001 Vol.103(1) Bom.L.R 865 (SC], Ace Pipeline Contracts Private Limited v. Bharat Petroleum Corporation Limited [(2007) 5 SCC 304 and Deep Trading Company v. Indian Oil Corporation [(2013) (3) AWC 2984 (SC)], the Hon'ble Supreme Court held that for cases falling under Section 11(6) are concerned, no time limit has been prescribed under 7 the Act, whereas a period of 30 days has been prescribed under 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. This Application cannot be entertained as the Sole Arbitrator had already been appointed and the schedule for submission of Statement of Claim, Statement of Defence & Counter claims and rejoinder to Statement of Defence & reply to the Counter Claims was also fixed by the Arbitrator. It is asserted that the Arbitrator appointed by the respondent retired as a Engineer-in-Chief, PWD, Government of Delhi and has vast expertise in the Construction Industry and had dealt with many cases as an Arbitrator and he is based out of New Delhi. The Arbitrator also issued letter dated 25.09.2014 to the Applicant and the respondent under Section 12 of the Act, 1996. The respondent followed due process provided under the Act and the clauses of the SCA in appointing the Sole Arbitrator. The applicant cannot invoke Section 11(6) of the Act as the respondent had complied with sub-sections (2), (3) and (4) of Section 11 of the Act. The respondent appointed Sole Arbitrator within 30 days as contemplated under sub-section (4)(a) of Section 11 of the Act. The applicant is precluded from approaching this Court under Section 11(6) of the Act 8 and as per the applicability of sub-section 6(a) of Section 11 of the Act, the respondent had acted as required under the procedure contemplated under the Clause 34 of the Sub-Contract Agreement, whereas sub-sections 6(b) and (c) of Section 11 of the Act does not apply for the present case and sought for dismissal of the Application.
6. Heard Sri P.Sree Raghu Ram, learned Senior Counsel appearing for Sri Krishna Mohan Shikaram, learned counsel for the applicant and Ms.Altaf Fathima, learned counsel appearing for Sri Gandham Durga Bose, learned counsel for the respondent.
7. Sri P.Sree Raghu Ram, learned Senior Counsel, while reiterating the averments in the affidavit filed in support of the Application submitted that the applicant issued letter dated 28.07.2014 invoking Clause 34 of the SCA for settlement of claims amicably in the first place and to take further suitable action for appointing an Arbitrator, if amicable settlement fails. He submits that though the respondent issued letter dated 08.08.2014, they did not intend to settle the issues amicably and replied that the claims made by the applicant are beyond the ambit of the contract and same are excepted matters and that no disputes existing for the purpose of settlement, but however, addressed a letter dated 14.08.2014 calling upon the applicant for resolving the issues, if any, within the ambit of the contract. He submits that though the meeting was held on 14.08.2014, no amicable settlement was arrived at between the parties, as such, present application is filed for appointment of an Sole Arbitrator. He also submits that when once the Application is filed by the applicant, the respondent cannot appoint arbitrator as they lost their right of appointment an Arbitrator. He also submits that even otherwise, there is no time limit for appointment of Arbitrator under Section 11(5) of the Act. He submits that even though 30 days period is not required to be maintained for initiating arbitration 9 proceedings under Section 11(6) of the Act, the present application is filed after expiry of 30 days after invocation of arbitration Clause 34 contained in SCA. He submits that this Application is filed on 02.09.2014 and by that time, the respondent lost their right to appointment an Arbitrator. In support of his contention, he relied on the judgment reported in Datar Switchgars Ltd., v. Tata Finance Ltd.,[2000 (6) ALT 26 (SC), Judgment of Calcutta High Court in Great Eastern Shipping Co. Ltd., v. Board of Trustees [(2004) (3) CHN 37) and Deep Trading Company v. Indian Oil Corporation (AIR 2013 SC 1479). He also submits that in this application, the applicant invoked the arbitration clause 34 on 28.07.2014 and also on 11.08.2014 and the present application is filed on 02.09.2014, as such, 30 days period was also complied with.
8. On the other hand, learned counsel for the respondent while reiterating the averments in the counter affidavit rebutted the contentions of the learned Senior Counsel for the applicant.
9. There is no dispute with regard to award of SCA in favour of the applicant by the respondent on 30.07.2012 for the execution of certain works relating to Sardar Sarovar Narmada Nigam Limited. During the course of execution of SCA, disputes arose between the parties in respect of alleged incomplete works and non-payment of certain dues by the respondent. There was an exchange of correspondence between parties and one such correspondence is the letter addressed by the applicant on 28.07.2014 calling upon the respondent for amicable settlement of the disputes that arose between them. According to the applicant, even after addressing letter dated 11.08.2014, as there is no amicable settlement with the respondent, filed the present application for appointment of an Arbitrator. It is the specific contention of the respondent that the present application under Section 11(6) of the Act 10 has already been filed on 02.09.2014, without intimation to the respondent and without waiting for the amicable settlement.
10. Before considering the rival contentions of the parties, it is necessary to extract the Clause-34 contained in SCA, which reads as follows:
"All disputes or differences whatsoever arising between NCC and SRRC out of or relation to the construction, meaning and operation or effect of this Sub Contract Agreement, or any breach thereof, shall be settled amicably by the parties, failing which, it shall be settled by a Sole Arbitrator, to be appointed by NCC, as per the provisions of the Indian Arbitration & Conciliation Act, 1996. The award passed by the Sole Arbitrator shall be final and be binding on the Sub-Contractor and NCC. The Venue of arbitration shall be Hyderabad, Andhra Pradesh."
A perusal of the aforesaid clause goes to show that if at all any differences or disputes arises between the parties in relation to the execution of the work or during the course of execution of the work, initially, both the parties shall try for amicable settlement by issuing a notice under Clause 34 for amicable settlement. If the amicable settlement fails, then they have to take steps for appointment of a Sole Arbitrator, to be appointed by NCC for resolving the disputes between the parties by issuing notice for appointment of Sole Arbitrator and the Award passed by the Sole Arbitrator shall be final and binding on both the parties. Now, we have to examine whether the applicant and the respondent have taken any steps for resolution of the disputes amicably or not?
11. It is the specific contention of the learned counsel for the respondent that the applicant never intimated to the respondent that there is a failure of amiable settlement between them and that the applicant also neither requested the respondent for appointment of arbitrator in accordance with Clause 34 of the SCA nor as per the provisions of the Act. As per Section 21 of the Act, date of service of notice by the party for appointment of an Arbitrator would be the relevant date for the purpose of commencement of the arbitration 11 proceedings. For the sake of convenience, Section 21 of the Act is reproduced hereunder:
"21. Commencement of arbitration proceedings: Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
Section 21 of the Act mandates that unless notice of intention for appointment of arbitrator is issued by one party to the other party, the question of compliance or non-compliance of the notice requirements by the other party does not arise. Let us examine as to whether the applicant has served any notice, as required under Section 21 of the Act, on the respondent for appointment of Sole Arbitrator or not?
12. Admittedly, the applicant has addressed letters dated 28.07.2014 & 11.08.2014 purportedly under Clause 34 of the SCA for settlement of disputes in the first place and not for the purpose of appointment of arbitrator. Even according to the applicant, it is categorically stated in the affidavit that after receiving correspondence vide letters dated 08.08.2014 and 12.08.2014, though there was a meeting held on 14.08.2014 for amicable settlement, but the same was not successful. It is the contention of the learned Senior Counsel for the applicant that in the letter dated 11.08.2014, they have requested the respondent for appointing an Arbitrator. A perusal of the aforesaid letter dated 11.08.2014, particularly, the concluding paragraph, goes to show that the said notice was issued only for the purpose of amicable settlement and not for requesting the respondent for appointment of Arbitrator. For the sake of convenience, the same is reproduced hereunder:
"21.00 This is the notice issued under clause 34 of the sub-contract agreement for settlement of claims amicably in the first place and further suitable action deemed fit under the circumstances as laid down in the agreement."12
13. The aforesaid concluding paragraph goes to show that it was only for the purpose of amicable settlement and not for seeking appointment of a Sole Arbitrator. That apart, on the letter addressed by the respondent on 16.08.2014, a meeting was held on 23.08.2014 wherein the applicant attended the same, but there was no fruitful result forthcoming for amicable settlement. In the affidavit, it is also categorically asserted by the applicant that the respondent is willfully protracting the matter without appointing the Arbitrator. However, it is pertinent to note here that the respondent addressed a letter dated 03.09.2014 to the Managing Director of the applicant stating as follows:
"1. Keeping in the view of your correspondence exchanged subsequent to meeting for amicable settlement dated 14.08.2014 and having already paid an excess amount of Rs.2,23,98,021/- as per statement enclosed along with our letter dated 22.08.2014, your proposal is not agreeable.
2. In addition, there was a default on your part by non-
performance and abandonment of work for which we have already invoked clause 9 of the subcontract agreement/work order to execute the balance work at your risk an cost.
3. In these circumstances, attempt for amicable settlement held on 14.08.2014 and 23.08.2014 has failed.
4. Since you have already invoked clause 34, we will appoint the Sole Arbitrator shortly under clause 34 in respect of Sub-Contract Agreements/Work Order; 8A, 8 & 9 for adjudication of all the claims and counter claims of parties."
As rightly contended by the learned counsel for the respondent, without any prior request or intimation with regard to the appointment of Sole Arbitrator prior to 30.09.2014, the applicant straight away filed this Application under Section 11(6) of the Act seeking appointment of an Arbitrator on 02.09.2014, which is in violation of the procedure envisaged Clause 34 of the SCA. Therefore, the applicant has failed to follow the mandate of issuance of notice under Section 21 of the Act, so also the procedure under Clause 34 of the Act and that he failed to take steps as required under the provisions of the Act.
13
14. It is next contended by the learned Senior Counsel for the applicant that there is no requirement of 30 days prior notice for filing an application under Section 11(6) of the Act. As rightly contended by the learned counsel for the respondent that the said argument was advanced but there is no whisper about the same in the affidavit filed in support of the Application. That apart, a perusal of the affidavit also shows that there is no such averment in the entire affidavit filed by the applicant. As already observed supra, the applicant neither declared about the failure of amicable settlement to the respondent nor requested for appointment of Sole Arbitrator in the correspondence that exchanged between the applicant and the respondent. On the other hand, the respondent had addressed a letter dated 03.09.2014 to the applicant of it's intention to appoint an Arbitrator and in fact had also appointed one Sole Arbitrator by name Mr.Inder Mohan Singh, for resolution of disputes between the parties. That apart, the applicant also failed to follow the mandate of issuance of notice under Section 21 of the Act. When once there is failure on the part of the applicant in following the procedure under Clause 34 of the SCA by issuing notice seeking appointment of Sole Arbitrator to the respondent, the present applicant is not maintainable and liable to be dismissed on this ground alone.
15. In Hindustan Construction Company Ltd., v. State of Orissa [2013 (1) ILR-CUT 548], wherein the Orissa High Court held that arbitration application is not maintainable for the reason that it is not preceded by a demand notice issued and served to the opposite party demanding for appointment of an Arbitrator, which is mandatory in law, as per Section 11(4)(a) of the Act.
16. It is vehemently argued by the learned Senior Counsel for the applicant that since the Application has been filed by the applicant for 14 appointment of Sole Arbitrator before this Court, the appointment of Sole Arbitrator by the respondent is of no consequence and same cannot be held to be valid.
17. In Man Mohan Kumbhaj v. Union of India [2020 (2) RLW 1331 (Raj.), wherein the Rajasthan High Court held that if a notice for appointment of Arbitrator in consonance with dispute resolution clause has not been given, the application can be dismissed on the said ground itself with the liberty to the applicant to proceed in the matter in consonance to the terms of the agreement to seek appointment of arbitrator. It was further held that, when the application under Section 11 of the Act itself is not maintainable, the issue in reference to Section 12(1) and 12(5) of the Amended Act of 2015 remains premature.
As already observed supra, since the applicant has filed the present Application without following the procedure envisaged under Clause 34 of the SCA and without issuing any prior notice for appointing Arbitrator, this Application is premature and not maintainable, in view of principle of law in the aforesaid judgment of Rajasthan High Court.
18. Be that as it may, as per Section 11(5) of the Act, a Sole Arbitrator should be appointed within a period of 30 days upon the request of other party which intends to initiate arbitration proceedings, as such, 30 days period for a party to appoint an Arbitrator is prerequisite condition. Clause 34 of the SCA mandates two stages i.e., firstly for amicable settlement and secondly for appointment of Arbitrator for resolution of disputes between the parties arising out of SCA. According to the applicant, they have issued two notices i.e., 28.07.2014 and 11.08.2014 requesting for amicable settlement and also for appointment of arbitrator, upon failure of the amicable settlement. As already observed supra, notice dated 11.08.2014 was 15 only intended for the purpose of amicable settlement as per Clause 34 in the first place and further suitable action deemed fit under the circumstances as laid down in the agreement. After failure of amicable settlement, it is the respondent who issued notice of it's intention to appoint a Sole Arbitrator as per Clause 34 of SCA on 03.09.2014 but not the applicant. There is no iota of evidence showing that the applicant has requested the respondent seeking appointment of Sole Arbitrator upon failure of amicable settlement on 14.08.2014 and 23.08.2014. Thus, it can be presumed that only after failure of amicable settlement, the respondent issued notice on 03.09.2014 for appointment of Sole Arbitrator, therefore, the period of 30 days as required under Section 11(5) would start from 03.09.2014 and not from 28.07.2014 and 11.08.2014, as alleged by the learned Senior Counsel for applicant. It is also pertinent to note that after 03.09.2014, the respondent sought willingness of the Arbitrator i.e., Mr. Inder Mohan Singh on 05.09.2014, who gave his consent on 15.09.2014 and thereafter, the respondent informed the same to the applicant on 23.09.2014. However, the applicant, without informing the respondent about failure of amicable settlement and without requesting the respondent for appointment of Arbitrator in accordance with Clause 34 of SCA, filed this Application on 02.09.2014, that too after respondent informing it's intention to appoint an Arbitrator on 03.09.2014. As such, contention of the learned Senior Counsel that 30 days period shall commence from 28.07.2014 and 11.08.2014 for initiation of arbitration proceedings under Section 11(6) of the Act and that the said period of 30 days is not required for filing this application before this Court, cannot be accepted as on the said dates, the applicant only sought for amicable settlement with the respondent but not seeking appointment of Arbitrator. Therefore, the contention of the learned 16 counsel for the application that there is no requirement to provide 30 days period cannot be accepted.
19. In Ace Pipeline Contracts Private Limited v. Bharat Petroleum Corporation Limited (2007 (2) ARBLR49 (SC); Datar Switchgears Ltd., (supra), it has been held by the Hon'ble Supreme Court that in cases arising under Section 11(6) of the Act, 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 of the Act, seeking appointment of a arbitrator and only then the right of the opposite party ceases. In the instant, as already observed supra, the 30 days period would start from the date of failure of amicable settlement i.e., from 03.09.2014, the date on which, the respondent addressed letter stating so to the applicant and not from 28.07.2014 and 11.08.2014, as alleged by the applicant. Though the applicant had relied on Great Eastern Shipping Company (supra), but the facts and circumstances therein are quite different from the facts of the case on hand. In the said case, dispute resolution clause did not provide for amicable settlement of the dispute and only provides for Arbitration clause. The applicant therein, even after addressing several letters to the respondent therein, when there is no response from the respondent for appointment of an arbitrator, filed an application under Section 11(6) of the Act, after a period of six months, which was allowed by the Court. But in the instant facts are otherwise, as such, the said judgment is not applicable to the facts of the case on hand.
20. Similarly, the judgment relied on by the learned Senior Counsel for the applicant in Deep Trading Company v. Indian Oil Corporation (supra) is also not applicable to the facts of the case on hand. In the 17 said case, the applicant therein has requested the opposite party to appoint an arbitrator as per the agreed procedure. Since the opposite party failed to as per the request of the applicant, the application under Section 11(6) was filed and thereafter, appointed an arbitrator. The Hon'ble Supreme Court held that the appointment so made is of no consequence and the right of the opposite party to appoint is lost once application for appointment is made to Court. But in instant case, as already supra, no request was made to the respondent by the applicant for appointment of arbitrator, as per Clause 34 of the SCA. As such, this judgment is not applicable to the facts of the instant case.
21. In Simpark Infrastructure Pvt Ltd., v. Jaipur Municipal Corporation (2013(3) RLW 2133 (Raj.), the arbitration clause provided that any dispute which is not resolved amicably shall be referred to a panel of three Arbitrators in terms of the Act. However, the applicant therein, without attempting to resolve the issue through amicable settlement approached the Court under Section 11(6) of the Act. The High Court of Rajasthan observed that (i) Where the parties have greed to arbitral procedure of dispute resolution, which has been made a condition precedent for invoking the arbitration clause, then it is required to be followed before filing an application under Section 11 of the Act, and (ii) Sub-section (6) of Section 11 of the Act cannot be invoked directly on expiry of thirty days notice under sub-section (4) of Section 11 of the Act, by the applicant for appointment of the Arbitral Tribunal ignoring the agreed arbitral procedure. After considering these observations, the High Court of Rajasthan held that the agreed arbitral procedure has not been followed by the applicant and therefore, the arbitration application is premature. In the instant case also, the applicant has not followed the procedure envisaged under Clause 34 of SCA, and straight away filed this application, without 18 intimation or notice to the respondent of its intention to approach this Court for appointment of an Arbitrator, which is wholly erroneous. In fact, it is the respondent, who, after failure of amicable settlement, taken steps for appointment of Sole Arbitrator and also nominated one Mr.Inder Mohan Singh, as Sole Arbitrator, in compliance of Clause 34 of SCA, as such, this Application for appointment of an arbitrator is not maintainable.
22. It is pertinent to note that under Section 11(6) of the Act, the Court has jurisdiction to make the appointment only when the person including an institution, fails to perform any function entrusted to it under that procedure. If the jurisdiction of the Court is invoked without first following the procedure agreed to between the parties, thus no cause of action would arise to seek the appointment from the High Court under Section 11(6) of the Act and thus the said petition would be premature. The parties are required to comply with the procedure of appointment as agreed to and the defaulting party cannot be allowed to take advantage of its own wrong. (see National Highways Authority of India and another v. Bumihiway DDB Ltd.,(JV) [2007 (2) ALT 18 (SC)].
23. Though it is vehemently argued by the learned Senior Counsel for the applicant that there exists disputes between the parties with regard to non payment of amount by the respondent, but the same is denied by the learned counsel for respondent stating that no arbitral dispute exists between the parties at the first instance, when the applicant addressed letters dated 28.07.2014 and 11.08.2014. As already observed supra, on two occasions i.e., on 14.08.2014 and 23.08.2014 amicable settlements failed, then only the respondent addressed letter to the applicant on 03.09.2014 of it's intention for appointment of an arbitrator. Since there exists disputes after amicable settlement failed, 19 the respondent thought it fit to resolve such disputes through arbitration only, addressed said letter on 03.09.2014 informing the applicant about proposal for appointment of an arbitrator, as the respondent did not agree to the proposal made by the applicant, as such, there exists a dispute, as the same was not resolved amicably.
24. The existence of dispute is essential for appointment for an arbitrator under Section 8 or a reference under Section 20 of the Act. There should be a dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion in denying, not merely inaction to accede to a claim or a request. Whether in particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. (see Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority [AIR 1988 SC 1007]. A reference to Arbitration could only be made pursuant to the last communication between the parties which indicates that there is no further possibility of settlement between the parties. [see Hari Shankar Singhania v. Gaur Hari Singhania [2006 (4)ALT 1 (SC). In the instant, since the respondent communicated about failure of amicable settlement on 03.09.2014, then any reference to the arbitration could be made only subsequent to 03.09.2014.
25. It is argued by the learned Senior Counsel for the applicant that there was no communication marked to the applicant which took place between the respondent and the so called Sole Arbitrator, appointed by the respondent. Learned counsel for the respondent submits that as per Clause 34 of the SCA, the appointment of Sole Arbitrator was to be done by the respondent and not by the applicant, as such, it was not necessary nor the contract provided otherwise that the applicant was to 20 be communicated all the communication between the respondent and the arbitrator. However, he submits that the applicant was duly communicated about the appointment of arbitrator vide letter dated 22.09.2014.
26. The communication must be addressed to all the concerned parties if appointment of Arbitrator is routed through them and/or if the agreement provides for. It does not consider it necessary that the communication is addressed to all the concerned parties simultaneously. It is sufficient if it is communicated in the first instance to any of them and thereafter to the others. (see Voltas Limited v. Rolta India Limited [2010 Indlaw MUM 1672].
27. Learned Senior Counsel argued that after amendment of Act 2015, a party to the agreement cannot unilaterally appoint an arbitrator. It is pertinent to note that even according to the respondent, arbitrator was appointed on 22.09.2014. The Arbitration (Amendment) Act, 2015 came into effect from 23.10.2015 i.e, after appointment of arbitrator by the respondent. Amendment Act, 2015 does not have retrospective effect to the arbitration proceedings commenced prior to the enactment of the Amendment Act, as such, as per the Clause 34 of SCA as well as the Act prior to Amendment, the respondent was entitled appoint an arbitrator unilaterally, and appointed as such.
28. The provisions of the Amendment Act, 2015 (with effect from 23.10.2015) cannot have retrospective operation in the arbitral proceedings already commenced unless the parties agree otherwise. (see Board of Control for Cricket in India v. Kochi Cricket Private Limited [(2018) 6 SCC 287]. In S.P.Singla Constructions (P) Ltd., v. State of Himachal Pradesh [2019 (2) SCC 488], the Hon'ble Supreme Court, while placing reliance on the judgment of Board of 21 Control for Cricket in India (supra) held that Section 12(5) of the Act does not apply to the case therein, since the arbitral proceedings commenced back in 2013, much prior to the commencement of Amendment Act on 23.10.2015.
In view of above facts and circumstances, all these Arbitration Applications are liable to be dismissed and accordingly dismissed. No order as to costs. As a sequel thereto, miscellaneous applications, if any, pending in these Arbitration Applications, shall stand dismissed.
____________________________ A.RAJASHEKER REDDY,J Date:05.02.2021 kvs 22 HON'BLE SRI JUSTICE A.RAJASHEKER REDDY ARBITRATION APPLICATION Nos.132, 133 & 134 OF 2014 Date: 05.02.2021 kvs