M/S Kaplish Construction (Pvt.) ... vs Project Director, District Urban ...
2013 Latest Caselaw 1306 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

Court No. - 24
 

 
Case :- FIRST APPEAL No. - 79 of 2007
 

 
Petitioner :- M/S Kaplish Construction (Pvt.) Limited Thru M.D.
 
Respondent :- Project Director, District Urban Dev. Agency & 3 Ors.
 
Petitioner Counsel :- Sandeep Dixit
 
Respondent Counsel :- Rajeev Singh
 

 
Hon'ble Rajiv Sharma,J.

Hon'ble Arvind Kumar Tripathi II,J.

1. Heard learned counsel for the parties and perused the record.

2. This instant appeal has been filed by M/S Kaplish Construction(Pvt.) Limited against order of the District Judge, Lucknow dated 24.4.2007 by which learned District Judge has allowed the application under Section 34 of the Arbitration and Conciliation Act 1996(hereinafter called as Act) with cost and impugned award dated 10.5.2005 was set aside.

3. Shorn of unnecessary details, the fact of the case are as under :

Following non payment for the material supplied by the appellant as per supply order dated 10.12.2003 of District Urban Development Agency, hereinafter called 'DUDA', the appellant invoking term no.6 of the supply orders put his claim on 10.6.2004 before the Executive Engineer but no decision was taken on that claim. The appellant served a notice dated 10.9.2004 on the 'DUDA', informing that he has appointed Sri Chandra Babu Tripathi Advocate as his Arbitrator under Section - 11(4) of the Act and requiring 'DUDA' to appoint their Arbitrator within 30 days of receiving the notice under intimation to the appellant and if they failed to nominate their arbitrator within the time given, Sri chandra Babu Tripathi, Advocate the arbitrator nominated by the appellant will be the Sole Arbitrator. The 'DUDA' did not reply the notice. Acting on the reference made by the appellant, the Arbitrator issued summon to 'DUDA' to put up written statement etc. but 'DUDA' did not appear despite the service and did not care to appear and contest the claim despite subsequent notices etc. also. The ''DUDA' however, through its letter dated 21.12.2004 protested the proceedings before the Arbitrator on the ground that there was no agreement between the parties for resolving the dispute through arbitration, hence the matter does not fall within the ambit of the Act. The Arbitrator ultimately after considering the evidence of appellant allowed his claim for Rs. 1,57,22,049/- with interest.

4. Feeling aggrieved, an application under Section 34 of Act for setting aside of the award was filed by DUDA which was allowed and award was set aside. Feeling aggrieved this appeal has been filed.

5. It was argued by learned counsel for the appellant that learned District Judge was wrong in deciding point no.2 against the appellant and the appointment of sole arbitrator was perfectly according to law.

6. As the appellant has not challenged the factum of arbitration clause before us hence, we are not going to discuss this aspect. Suffice is to say that supply order dated 10.12.2003 has a clause which is Clause No.6 which reads as follows :

"The decision of the E.E. in respect of any dispute will be final and all cases will be under jurisdiction of Lucknow."

7. This clearly indicates that there was an agreement regarding arbitrator and Executive Engineer was to be the Arbitrator.

8. As regards issue no.2 framed by the District Judge, Lucknow is concerned, it is regarding the appointment of Sri Chandra Babu Tripathi as sole arbitrator. When the arbitration clause says that the decision of the E.E. in respect of any dispute will be final then it will have to be discussed as to how Sri Chandra Babu Tripathi was appointed as a sole arbitrator by the appellant itself. In this regard learned counsel for the appellant drew our attention towards Section 11, Sub - Clause 3 and Sub - Clause 4 of the act. The relevant portion of Section 11 is reproduced as below :

"11. Appointement of arbitrators - (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in Sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in Sub-section (3) applies and-

(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment:

the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(6) Where, under an appointment procedure agreed upon by the parties,-

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perfrom any function entrusted to him or it under that procedure,

a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. "

9. As per learned counsel for the appellant Sri Sandeep Dixit, when opposite parties failed in appointing arbitrator and the arbitration clause has not provided for a procedure of appointment of arbitrator then as per Sub-station 3 of Section 11 of the Act, the appellant suggested the name of one arbitrator on his behalf and requested the opposite party to appoint another arbitrator but when the opposite party failed to appoint the second arbitrator then the arbitrator appointed by him proceeded with the matter.

10. Learned counsel appearing for the respondents argued that in this case when an arbitrator has been named then provisions of Section 11, Sub-Clause 2 and 6 will apply. As Executive Engineer was to act as a sole arbitrator then the appelalnt should have resorted to the provision of Sub-Section 6 of Section 11 of the Act.

11. A perusal of Sub-Section 3 of Section 11 of the Act clearly goes to show that it is applicable when there is an agreement for three arbitrators, in that case one arbitrator shall be appointed by each party and then both the appointed arbitrator shall appoint the third arbitrator who shall act as a Presiding Arbitrator. In view of this the argument advanced by learned counsel for the appellant is misconceived. In the instant case, Executive Engineer was the appointed arbitrator and there was no occasion for the appellants to invoke the provisions of Sub - Section 3 of Section 11 of the Act.

12. Apex Court has in the case of Iron and Steel Company Ltd. Vs. M/s. Tiwari Road Lines reported in AIR 2007 SC (2) 2064 has held in para 7 that :

"7. In the present case the agreement executed between the parties contains an arbitration clause and clause 13.1 clearly provides that all disputes and differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract 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. This clause is in accordance with Sub-section (2) of section 11 of the Act. There being an agreed procedure for resolution of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration Sub-sections (3), (4) and (5) of Section 11 can have no application."

13. It is to be noted that procedure for appointment of arbitrator has been given in Clause(6) of the supply order, so in the case of Executive Engineer failing to act as an arbitrator, the only recourse open to the appellant to file a petition under Section 11 Sub - Section 6 of the Act.

14. In view of the above discussion we are of the view that learned District Judge has rightly allowed the application under Section 34 of the Act and set aside the award dated 10.5.2005 given by Sri Chandra Babu Tripathi.

15. Appeal is liable to be dismissed and is hereby dismissed.

Order Date :- 25.4.2013

Ashish Pd./-