Bhartiya Construction Company vs Delhi Development Authority
1996 Latest Caselaw 1016 Del

JUDGMENT

M.K. Sharma, J.

(1) Tenders in respect of construction of some houses at Sarita Vihar, New Delhi, having been invited by the respondent No. 1, the petitioner submitted his tender for the aforesaid work and his tender was accepted on 18.9.1992. In respect of the aforesaid contract, some disputes and differences arose between the parties and accordingly, the petitioner filed the present petition in this Court seeking for filing of the arbitration agreement and for appointment of an independent arbitrator to adjudicate upon the aforesaid disputes arising between the parties.

(2) On perusal of the records of the case, it appears that prior to the filing of the suit, the petitioner did not send any notice and/or request to the respondents for appointment of an arbitrator as required. In the present petition, the Chairman, Delhi Development Authority has been made a party, respondent No. 1 and the Engineer Member of the Delhi Development Authority has been made the second respondent i.e. respondent No.2. It further appears that after filing of the aforesaid petition, notice was issued by the petitioner to the Chief Engineer on 25.8.1995 invoking Clause 25 of the contract and requested the Chief Engineer of the Delhi Development Authority to appoint an arbitrator within the statutory period of 15 days from the date of receipt of the said notice.

(3) The respondents filed a reply to the aforesaid petition, contending inter alia, that the prayer for appointment of the arbitrator by the petitioner in the present petition is not in accordance with Clause 25 of the agreement and that no direction has been sought against the Chief Engineer, the person designate, under Clause 25 and, therefore, the petition is defective and not maintainable. It has been further stated that the Chief Engineer was not approached for appointment of an arbitrator and that he had never refused to appoint the arbitrator.

(4) The learned counsel appearing for the respondent, Delhi Development Authority, stated before me that the Chief Engineer, who is the person designate under Clause 25 of the agreement has since appointed an arbitrator for adjudicating the disputes arising between the parties.

(5) The learned counsel appearing for the petitioner submitted that since notice was served on the respondents to appoint an arbitrator in terms of the contract and since no action was taken on the said request of the petitioner, it must be construed that the respondents neglected to act upon the contract and under such circumstances, the Court has to assume jurisdiction and appoint an independent arbitrator in terms of Section 20 of the Arbitration Act. In support of his submission, the learned counsel relied upon a decision of the Supreme Court in M/s. G. Ramachandra Reddy & Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, . The learned counsel further submitted that although prior to the filing of the present petition under Section 20 of the Arbitration Act in this Court, no notice was issued to the respondents requesting for appointment of an arbitrator in terms of the contract, but, in view of the application filed by the petitioner under Section 20 of the Arbitration Act, the said application could itself be treated as an application for appointment of an arbitrator and the respondents having failed to appoint an arbitrator within 15 days statutory period from the date of receipt of a copy of the said petition, the petitioner could invoke the Court's jurisdiction under Section 20 of the Arbitration Act and pray for appointment of an independent arbitrator to adjudicate upon the disputes arising between the parties. In support of the aforesaid submission, the learned counsel relied upon the decision of this Court in Messrs. Greenland Foods Pvt. Ltd., Vs. Union of India .

(6) The learned counsel appearing for the respondents, on the other hand, submitted that in the present petition, the person designate, under Clause 25 of the agreement has not been made a party and accordingly, the present petition is not maintainable. The counsel submitted that since the Chief Engineer, the person designate under Clause 25 of the agreement has not been made a party in the present petition, the petitioner could not claim that the application filed by the petitioner in this Court under Section 20 of the Arbitration Act could be treated as a notice for appointment of an arbitrator. The counsel further submitted that the petitioner never made any request or approached the Chief Engineer, the person designate, under Clause 25 of the agreement for appointment of an arbitrator and that the said authority has never refused to appoint an arbitrator and, therefore, no cause of action has arisen in the present petition and as such, this submission of the counsel for the respondent is premature.

(7) I have carefully perused the judgment of the Supreme Court in M/s. G. Ramachandra Reddy & Co. (supra). A careful perusal of the said decision would show that in the aforesaid case, the claimant contractor exercising option under clause 17 of the General Condition of Contract made a request to the Engineer in chief to appoint a sole arbitrator, in terms of the contract, to adjudicate upon the dispute arising between the parties. Inspite of the said request, since no action was taken by the respondents, the said contractor filed a suit under Section 20 of the Arbitration Act. In the context of the aforesaid facts, the Supreme Court held that when notice was given to the opposite contracting party to appoint an arbitrator in terms of the contract and if no action had been taken, it must be deemed that he neglected to act upon the contract. It was further held that when no agreement was reached, even in the court between the parties, the court gets jurisdiction and power to appoint an arbitrator.

 (8) On the facts of the said case, the Supreme Court further held thus:-    "IN the instant case the respondent did not appoint an arbitrator, after the notice was received. The respondent averred in the written statement that it was under consideration. Even before the learned single Judge he did not even state that he was willing to appoint an arbitrator."  

 (9) In that context, the Supreme Court held thus:-    "NOTICE was an intimation to the opposite contracting party to act upon the terms of the contract and his/its nonavailment entails the forfeiture of the power to appoint an arbitrator in terms of the contract and gives right to the other party to invoke the court's jurisdiction under Section 20."  

(10) The records of the present case disclose that the facts and circumstances of the present case stand on a different footing than the facts in the case of M/s. G. Ramachandra Reddy & Co. (supra), in the context of which the Supreme Court gave its conclusive finding as recorded above. The Supreme Court while coming to the aforesaid conclusion took into consideration the ratio of its earlier decision in the case of Union of India Vs. Prafulla Kumar Sanyal , wherein, the Supreme Court had observed that before appointing an arbitrator by the Court itself, "it is desirable that the Court should consider the feasibility of appointing an arbitrator according to the terms of the contract" and the issuance of the notice giving 15 days' time as contemplated under Section 8(a) of the Act did not arise on the facts in that case. The Supreme Court in paragraph 5 of the judgment in M/s. G.Ramachandra Reddy & Co. (supra) held that in Prafulla Kumar's case (supra) no notice was given to the appellant to appoint an arbitrator in terms of the contract before the suit was filed and no action was taken pending suit except contending that the matter was under active consideration. In that context, the Supreme Court distinguished the facts of the case in G. Ramachandra Reddy & Co (supra) from the case of Prafulla Kumar Sanyal (supra).

(11) On consideration of the ratio of both the aforesaid decisions, it appears that the facts of the present case are similar to that of the case of Prafulla Kumar Sanyal' (supra). I have also considered the ratio of the decision of this Court in Messrs. Greenland Foods Pvt., Ltd., (supra). In my considered opinion, the ratio of the said decision is not applicable to the facts and circumstances of the present case, inasmuch as, in the present petition, the Chief Engineer, who is the person designate, under Clause 25 of the agreement has not been made a party and, therefore, the application filed by the petitioner under Section 20 of the Arbitration Act could not be treated as an application or as notice for appointment of an arbitrator to the competent authority. In this connection, reference may also be made to a Division Bench decision of this Court in Union of India Vs. Surinder Kumar , wherein it was held that the Executive Engineer who had signed the contract and was dealing with the matter should be made a party respondent and, therefore, when no notice was given to him of filing the award, time for filing the objection did not commence. Therefore, when the Chief Engineer was not made a party to the present petition, it cannot be held that the proceeding was properly instituted or that the petition itself could be treated as notice of the petitioner to appoint an arbitrator.

(12) In this case also, no notice was given to the respondents by the petitioner to appoint an arbitrator in terms of the contract before the suit was filed. Immediately after filing of the suit, a notice was issued by the petitioner to the Chief Engineer for appointment of an arbitrator and during the pendency of the present petition, an arbitrator has been appointed by the respondents. Since, the contract in the present case provided for appointment of a named arbitrator, therefore, the parties would under normal circumstances be bound by the terms of the contract and the Court would not be justified to appoint an independent arbitrator unless, of course, the named arbitrator refused or neglected to enter upon the reference. The Court also could assume jurisdiction under Section 20 of the Arbitration Act only when a party to the contract calls upon the other party to appoint an arbitrator in terms of the contract and on failure of the other party in pursuance of the said request to appoint an arbitrator, the Court could assume jurisdiction under Section 20 of the Arbitration Act to appoint an arbitrator.

(13) On the facts of the present case, it is crystal clear that since no notice was sent to the Chief Engineer, the person designate, under Clause 25 of the agreement, prior to the filing of the present petition, there could not have been any refusal to appoint an arbitrator by him in the instant case. Without resorting to the normal course of issuing a notice to the person designate, requesting him to appoint an arbitrator in terms of the contract, the petitioner straightaway came to this Court and filed the present petition for appointment of an independent arbitrator and during the pendency of this petition, issued a notice to the Chief Engineer, under Clause 25 of the agreement. In the present petition also, the Chief Engineer, the person designat, was not made a party respondent.

(14) In the light of the facts and circumstances of this case, i.e., in petitioner approaching this Court under Section 20 of the Arbitration Act, without serving a notice on the person designat, as required and also without making him a party respondent in the present case, in my considered opinion, this Court cannot assume jurisdiction to appoint an independent arbitrator under Section 20 of the Arbitration Act.

(15) During the pendency of this petition, it is stated by the respondents and not denied by the petitioner that an arbitrator has been appointed by the respondents in terms of the contract to adjudicate upon the disputes between the parties. In view of the aforesaid position, I direct that the disputes raised in the present petition be referred to the arbitrator appointed by the respondents to adjudicate upon in the present case within four weeks from today. Upon such reference being made, the arbitrator shall enter upon the reference immediately and make/publish his award as expeditiously as possible.

(16) The petition accordingly stands disposed of in terms of the aforesaid order. The parties shall, however, bear their own costs.