V.K. Gupta And Associates vs Superintending Engineer
2023 Latest Caselaw 24097 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 


?Neutral Citation No. - 2023:AHC:176085
 
Reserved on: 25.8.2023
 
Delivered on: 6.9.2023
 
Court No. - 65
 

 
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 161 of 2022
 

 
Applicant :- V.K. Gupta And Associates
 
Opposite Party :- Superintending Engineer
 
Counsel for Applicant :- Satya Prakash,Apoorv Tiwari,Manoj Kumar Yadav,Raj Kumar Yadav,Sr. Advocate
 
Counsel for Opposite Party :- C.S.C.
 

 
Hon'ble Rajeev Misra,J.

1. Heard Mr. Dinesh Gupta along with Mr. Satya Prakash, the learned counsel for applicant and the learned Standing Counsel representing opposite party.

2. Perused the record.

3. This application under Section 11(4) of the Arbitration and Conciliation Act, 1996 has been filed by applicant for a direction that an Arbitrator be appointed to fill the vacancy in the Arbitral Tribunal (comprising of three Arbitrators) which was already continued by opposite party-1 itself or in the alternative appoint a sole arbitrator, to resolve the dispute between the parties.

4. Record shows that parties entered into an agreement, vide Contract Bond No. 08/SE-SRE/2010-11, dated 13.09.2008 for continuation of a bridge over the Yamuna River at Clause 25.3 of the General Condition of Contract contains an arbitration clause for redressal of the dispute arising out of the contract entered into by the parties. For ready reference, Clause 25.3 of the agreement is reproduced hereinunder:-

"ARBITRATION (GCC Clause 25.3)

The procedure for arbitration will be as follows:

25.3 (a) In case of Dispute or difference arising between the Employer and a domestic contractor relating to any matter arising out of or connected with this agreement, such disputes or difference shall be settled in accordance with the Arbitration and Conciliation Act, 1996. The parties shall make efforts to agree on a sole arbitrator and only if such an attempt does not succeed and the Arbitral Tribunal consisting of 3 arbitrators one each to be appointed by the Employer and the Contractor and the third Arbitrator to be chosen by the two Arbitrators so appointed by the Parties to act as Presiding Arbitrator shall be considered. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding Arbitrator shall be appointed by the Council, Indian Roads Congress

(b) The Arbitral Tribunal shall consist of three Arbitrators one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators so appointed by the Parties, and shall act a presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the Council, Indian Roads Congress.

(c) If one of the parties fails to appoint its arbitrator in pursuance of sub- clause (a) and (b) above within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the * Council, Indian Roads Congress shall appoint the arbitrator. A certified copy of the order of the Council, Indian Roads Congress, making such an appointment shall be furnished to each of the parties.

(d) Arbitration proceedings shall be heid in India, and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.

(e) The decision of the majority of arbitrators shall be final and binding upon both parties. The cost and expenses of Arbitration proceedings will be paid as determined by the arbitral tribunal. However, the expenses incurred by each party in connection with the preparation, presentation, etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party or on its behalf shall be borne by each party itself.

(f) Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owners shall not be withheld, unless they are the subject matter of the arbitration proceedings."

5. During subsistence of aforementioned contract a dispute arose between the parties. Consequently, a demand was raised by applicant before the competent authority under the agreement to constitute the Arbitral Tribunal as envisaged in the agreement itself for resolving the dispute, arising out of the contract.

6. The request made by the applicant was accepted by the competent authority. Resultantly, vide order dated 09.07.2021 passed by the competent authority, an Arbitral Tribunal comprising of three Arbitrators namely-(i) Sh. B.D. Joshi, as the Presiding Arbitrator. R/o F-312, Sarita Vihar, New Delhi, (ii). Sh. Rajendra Prashad Gupta, as the nominee arbitrator on behalf of the Applicant. R/o M-80, Greater Kailash-1, New Delhi and (iii). Sh. Satya Narayan Das as the nominee arbitrator on behalf of the respondents. R/o C-301, Vivek Vihar, Section-82, Noida-201304, Distt. Gautam Budha Nagar (UP), was duly constituted.

7. During the subsistence of the Arbitral Tribunal as noted above, one of the Arbitrators namely. Mr. S.N. Das reclused himself from the arbitral proceeding on 17.07.2022. Resultantly, a vacancy arose in the Arbitral Tribunal so constituted. In view of aforesaid eventuality, a request was made by applicant to the competent authority to appoint the third arbitrator so that the vacancy in the Arbitral Tribunal is filled. However, no heed was paid to the request of the applicant. Resultantly, applicant has now approached this Court by means of present application under Section 11(4) of the Arbitration and Conciliation Act, 1996.

8. Mr. Dinesh Gupta, the learned counsel for applicant contends that there is no dispute between the parties regarding the fact that there exits a valid agreement between the parties. Clause 25.3 of the General Condition of Contract also contemplates for appointment of an Arbitral Tribunal for resolving the dispute, if any, between the parties arising out of the agreement aforementioned. He further submits that a dispute arose between the parties regarding the works done in performance of the contract. Accordingly, an Arbitral Tribunal was, thereafter, constituted, vide order dated 09.07.2021 to resolve the dispute that had emerged between the parties. Unfortunately, one of the Arbitrator namely, S.N. Das reclused himself from the arbitral proceedings during the subsistence of the arbitral tribunal. Resultantly, the mandate of the third arbitrator came to an end on account of the voluntary act of the said arbitrator. As such, a vacancy arose in the Arbitral Tribunal which was required to be filled. Accordingly, the arbitral tribunal accordingly passed the order dated 22.07.2022 directing the applicant to avail the legal remedy available in law. In view of above, a request for appointment of an Arbitrator to fill in the vacancy in the Arbitral Tribunal was made by the applicant, vide letter dated 08.08.2022. However, the said request has not been accepted till date. As a result on account of the inaction of the competent authority, the arbitral tribunal has not yet been duly constituted.

9. It is then contended by the learned counsel for the applicant that the agreement does not contemplate a contingency that after the appointment of the Arbitrators for constituting the Arbitral Tribunal, the authority concerned shall still have the jurisdiction to re-appoint an Arbitrator in respect of any contingency. In the alternative, it is also contended that after the third arbitrator namely Mr. S.N. Das had reclused himself from the arbitral proceedings, request was made by the applicant vide letter dated 09.08.2022, to the appointing authority to fill in the vacancy which has occurred in the arbitral tribunal. However, no action was taken by the appointing authority in the light of above. As such, after expiry of a period of 30 days from the date of the letter dated 09.08.2022 and also the law laid down by the Apex Court in SBP and Co. Vs. Patel Engineering reported in 2000 (83) The AIC 15, the appointing authority ceased to have jurisdiction to fill in the vacancy in the arbitral tribunal by re-appointing the third arbitrator. Since, the agreement is totally silent qua the same, therefore, the only procedure which is now available to the aggrieved party for getting the vacancy in the arbitral tribunal filled is by approaching this Court under Section 11(4) of the Arbitration and Conciliation Act, 1996. He further submits that in the present case, the vacancy has accrued on account of the fact that one of the arbitrators has reclused himself from the arbitral proceeding. By reason of above, the mandate of third arbitrator to continue with the arbitral proceeding has also now come to an end. The same can now, therefore, be filled only in exercise of jurisdiction under Section 11(4) of the Arbitration and Conciliation Act, 1996.

10. It is lastly contended by the learned counsel for applicant that though the arbitral tribunal was constituted, vide order dated 09.07.2021. However, in spite of the fact that a period of almost 2 years is about to roll by, no progress has been made by the arbitral tribunal for resolving the dispute. On the above premise he submits that interest of justice shall better be served in case a sole arbitrator is appointed to resolve the dispute between the parties. The Arbitral tribunal will be a cumbersome process and would involve huge expenditure which would not be beneficial for the parties. He has then referred to the judgment of Supreme Court in Ellora Paper Mills Limited Vs. State of Madhya Pradesh, AIR 2022 SC 280. To buttress his submission that in an appropriate case, the court can itself appoint an arbitrator. Reliance is placed upon paragraphs 5 and 6 of the report, which are reproduced hereinunder:-

"5. We have heard the learned counsel for the respective parties at length. Having heard learned counsel for the respective parties and on considering the impugned judgment and order passed by the High Court, the short question which is posed for consideration of this Court is, whether, the Stationery Purchase Committee - Arbitral Tribunal consisting of the officers of the respondent has lost the mandate, considering Section 12(5) read with Seventh Schedule of the Arbitration Act, 1996. If the answer is in the affirmative, in that case, whether a fresh arbitrator has to be appointed as per the Arbitration Act, 1996?

6. It is not in dispute that the High Court earlier constituted the Arbitral Tribunal of Stationery Purchase Committee comprising of officers of the respondent, viz, Additional Secretary, Department of Revenue as President and (i) Deputy Secretary, Department of Revenue, (ii) Deputy Secretary, General Administration Department, (iii) Deputy Secretary, Department of Finance, (iv) Deputy Secretary/Under Secretary, General Administration Department and (v) Senior Deputy Controller of Head Office, Printing as Members. It may be true that the earlier Arbitral Tribunal - Stationery Purchase Committee was constituted as per the agreement entered into between the parties. It is also true that initially the said Arbitral Tribunal was constituted by the High Court in the year 2001, however, thereafter Stationery Purchase Committee - Arbitral Tribunal could not commence the arbitration proceedings in view of number of proceedings initiated by the appellant. There was a stay granted by the High Court from 4.5.2001 to 24.01.2017 and thereafter in the year 2019, the present application was preferred before the High Court invoking Section 14 read with Sections 11 and 15of the Arbitration Act, 1996 seeking termination of the mandate of the originally constituted Arbitral Tribunal and to appoint a new arbitrator. It has also come on record that in between, the officers who were members of the Stationery Purchase Committee - Arbitral Tribunal had retired. At this stage, we are not considering whether those persons could have been continued as members of the Stationery Purchase Committee - Arbitral or not. However, the fact remains that after the constitution of the Arbitral Tribunal in the year 2001, no further steps whatsoever have been taken in the arbitration proceedings and therefore technically it cannot be said that the arbitration proceedings by the Arbitral Tribunal - Stationery Purchase Committee has commenced."

11. On the aforesaid premise, the learned counsel for applicant contends that interest of justice shall better be served, in case, a sole arbitrator is appointed by this Court rather than filling the vacancy of the third arbitrator in the arbitral tribunal.

12. Per contra, the learned Standing Counsel has opposed the present application. He submits that since the quantum of the dispute has not been disclosed in the application under Section 11(4) of the Arbitration and Conciliation Act, 1996, therefore, it cannot be presumed that there exists a dispute capable of being referred to arbitration. He further, submits that the agreement contemplates pre-arbitral proceedings before invoking the arbitration clause for appointment of the arbitral tribunal. As the applicant has failed to follow the pre-arbitral procedure contemplated under the agreement, therefore, they cannot jump over the procedure provided under the agreement and straight away file an application under Section 11(4) of the Arbitration and Conciliation Act, 1996. He, therefore, contends that present application is misconceived and therefore liable to be dismissed.

13. In rejoinder, Mr. Dinesh Gupta, the learned counsel for applicant has vehemently opposed the submissions urged by the learned Standing Counsel in opposition to the present application under Section 11(4) of the Arbitration and Conciliation Act, 1996. He contends that the only issue which is now required to be decided by this Court is whether the vacancy occurring in the arbitral tribunal already constituted can be filled or not in exercise of jurisdiction under Section 11(4) of the Arbitration and Conciliation Act, 1996. The quantum or nature of the dispute is not required to be looked into at the time of exercising jurisdiction under Section 11(4) of the Arbitration and Conciliation Act, 1996. The only requirement of law is that there must be a dispute which is capable of being referred to arbitration.

14. With regard to the second objection raised by the learned Standing Counsel that since the arbitration agreement contemplates pre-arbitral procedure which has not been followed, and therefore the present application is not maintainable. The learned counsel for applicant contends that the said submission has been urged only to be rejected by this Court. Once the Arbitral Tribunal was duly constituted, therefore, at this stage, it cannot be urged that the pre-arbitral procedure was not followed. The competent authority has not taken the view that since the pre-arbitral procedure contemplated under the agreement has not been followed, therefore, no arbitral tribunal can be constituted. As such, the learned Standing Counsel is estopped from raising this objection.

15. Having heard the learned counsel for applicant, the learned Standing Counsel for State and upon perusal of record, this Court finds that there is no dispute between the parties that there exists a valid agreement between the parties containing an arbitration clause. Consequently, in case, there is a dispute between the parties arising out of the agreement aforementioned such a dispute can be referred for adjudication to the arbitrator. The agreement provides for constituting an arbitral tribunal comprising of three arbitrators.The competent authority, vide order dated 09.07.2021, constituted an arbitral tribunal comprising of three arbitrators namely-(i) Sh. B.D. Joshi, (ii). Sh. Rajendra Prashad Gupta and (iii). Sh. Satya Narayan Das. Mr. S.N. Das, the nominee arbitrator from the side of the applicant reclused himself. As such, the mandate of the said arbitrator in terms of Section 12 of the Arbitration and Conciliation Act, came to an end. Resultantly, a vacancy arose.

16. Under the scheme contemplated under the Arbitration and Conciliation Act, 1996 since there is no power with the competent authority to re-appoint an Arbitrator. It is apposite to mention here that even otherwise a request was made by applicant to the appointing authority vide, letter dated 09.08.2022, to fill in the vacancy by appointing a fresh arbitrator which was now adhered to. The period of 30 days from the date of letter dated 09.08.2022 has already expired. As such, the appointing authority now has no jurisdiction to appoint an arbitrator. Therefore, it is now this Court alone in exercise of jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 which can fill the vacancy by appointing a fresh Arbitrator. The Court, further, finds that the arbitral tribunal has not proceeded with the matter substantially. The mandate of the Arbitrator already appointed has ceased to exist because one of the Arbitrator has reclused himself from the proceedings on 17.7.2022. As such, the arbitral tribunal could not proceed with the matter, therefore, the Court further finds that the arbitral tribunal so constituted has not proceeded with the matter substantially. The arbitral tribunal shall be expensive for the parties. Therefore, in the interest of the parties as the appointing of a sole arbitrator shall reduce the cost of arbitral proceedings, therefore, by reason of above and by virtue of the law laid down by Apex Court in Union of India Vs. BESCO Ltd., AIR 2017 SC 1628, a sole arbitrator is liable to be appointed in the interest of justice.

17. In view of above, the present application is liable to allowed.

18. Accordingly, it is allowed.

19. Let Hon'ble Mr. Justice Arun Tondon, Retired Judge of this Court, R/o 3, Patrika Marg, Civil Lines, Allahabad, Mobile No. 09415214462, be appointed as an Arbitrator to resolve the dispute between the parties subject to his consent in terms of Section 11(8) of the Arbitration and Conciliation Act, 1996.

20. Registry is directed to obtain consent of proposed arbitrator in terms of Section 11(8) of the Act within three weeks.

21. List thereafter.

Order Date :- 6.9.2023

Arshad