The Division Bench of the Supreme Court consisting of Justices Ajay Rastogi and Abhay S. Oka in an appeal filed assailing an order declining to appoint an Arbitrator in the exercise of its power u/s 11(6) of the Arbitration and Conciliation Act, 1996 (“the Act”) held that once an application u/s 11(6)  has been filed for appointment of   an   Arbitrator before   the   High   Court,   the respondents forfeited their right to appoint an Arbitrator and the High  Court  alone   holds jurisdiction to appoint  an  Arbitrator  in exercise of power u/s 11(6).

Facts

The tender of the appellant was accepted and the same was communicated by letter about which a contract agreement was executed between the parties containing clauses 63 and 64 of the general conditions of contract containing the clause of arbitration for settlement of claims and/or disputes between the parties. Since there were claims which could not be settled, the appellant   served   a   legal   notice  for appointment   of   an   Arbitrator   and   for   settlement   of   claims. Although, there was no express reference made of clauses 63 and 64 in the notice, but the pith and substance of the notice was for settlement of disputes through the process of arbitration   in   terms   of   the   clause   of   arbitration   under   general conditions of agreement which is a part of the contract agreement executed between the parties.

Procedural History

  • the notice was duly served upon the respondents. It is alleged that since the respondents failed to appoint an arbitrator pursuant to notice, Arbitration Petition came to be filed in the High Court of Orissa for appointment of an Arbitrator u/s 11(6) of the Act.
  • just after filing of the arbitration petition, the appellant has completely forgotten of acting in furtherance thereto and it was never in notice of the respondents of such petition being filed since no notice was served at any stage.
  • in   the   meanwhile, the   respondents   vide   letter , in response to the letter of the appellant asked the appellant to select two names from a panel of four persons.
  • immediately thereafter, a Miscellaneous Case was filed in Arbitration Petition seeking   an   order   restraining   the respondents from appointing an Arbitrator and that application too remained pending and no action was taken up by the appellant to pursue   either   the   Arbitration   Petition   or   the Miscellaneous Case before the High Court.
  • by   letter, two officers from the panel suggested by the respondents were selected by   the   appellant and in furtherance thereto, the respondents constituted an Arbitration Tribunal.  The   appellant   thereafter   appeared   before   the   Arbitral Tribunal and preferred statement of claim.
  • The respondents also submitted their statement of defence. The appellant thereafter appeared before the Arbitral Tribunal and submitted an application that the Tribunal has not been nominated within the stipulated time and hence, the constitution of the Arbitral Tribunal is not valid and further submitted that the Tribunal should not proceed with the arbitration proceedings. The fact remains that the arbitration petition filed by the appellant has not seen the light of the day except the fact that it was filed in the Registry of the High Court.
  • Since the Arbitral Tribunal was constituted, with consent of the appellant, the Tribunal   proceeded   with   the   arbitration proceedings and since the appellant failed to participate despite the opportunity being afforded, ex­parte award came to be passed rejecting the claim of the appellant. The fact is that finally in the arbitration petition filed by the appellant, notices were issued to the respondents by the High Court in the year 2016, almost 3 years after passing of the ex­parte award. The High Court, taking note of such peculiar facts and circumstances, dismissed the arbitration petition by an Order with liberty to the appellant to submit its objections u/s 34 or 37 of the Act, if so advised.

Observations of the Court

The Bench opined that:

“The fact still remains that except the letter being once sent by the appellant on 27th December, 2011 informing of the arbitration petition being filed under Section 11(6) of the Act before the High Court, no steps were taken thereafter to pursue his arbitration application and since the appellant had not participated before the Arbitral Tribunal after filing of the statement of claim, ex­parte award came to be passed by the Arbitral Tribunal on 21st  June, 2013.  It may be noticed that notices were issued for the first time by the High Court of the arbitration petition filed by the appellant in the year 2016 almost 3 years after passing of the ex­parte award dated 21st June 2013.”

They observed that:

“In our considered view, so far as the   question   of   law   is concerned, certainly being settled that after the application has been filed for appointment of an Arbitrator under Section 11(6) of the Act, before the High Court the respondents forfeited their right to appoint an Arbitrator under the clause of arbitration thereafter but from the narration of facts which has been noticed by us, we are of the view that no error was committed by the High Court in dismissing the petition filed under Section 11(6) of  the Act for appointment of an Arbitrator.”

Judgment

The bench dismissed the appeal.

Case Name: M/S. Durga Welding Works vs Chief Engineer, Railway Electrification, Allahabad & Anr.

 Citation: CIVIL APPEAL NO(S).54 OF 2022

Bench: Justice Ajay Rastogi, Justice Abhay S. Oka

Decided on: 4th January 2022

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Ayesha