Durga Luxmi Builders vs Vice-Chancellor, University Of ...
1997 Latest Caselaw 252 Del

JUDGMENT

M.K. Sharma, J.

(1) The petitioner entered into a contract with the University of Delhi through its Executive Engineer, South Campus, for work of "Construction of Boys Hostel at South Campus, Dhaula Kuan, New Delhi". The contract also related to development of land including sewerage, drainage and water supply etc. The work order was issued to the petitioner on 5.4.1988 and the work was executed and completed in all respect by the petitioner.

(2) However, and differences arose between the parties in respect of the aforesaid construction work. The petitioner invoked arbitration clause on 1.11.1993 by writing letters and calling upon the respondent No. 1 to appoint the Arbitrator to refer the disputes between the petitioner and the respondents. However, since the respondents did not take any step for appointment of the Arbitrator in terms of the arbitration agreement the petitioner approached this Court with a petition under Sections 8 and 20 of the Arbitration Act with the prayer for direction to the respondent to file the arbitration agreement in this Court and for appointment of an Arbitrator as provided in Clause 25 of the contract agreement.

(3) After notices were served on the respondents, the respondents appeared and upon hearing the parties this Court by order dated 13.5.1996 referred the disputes enumerated by the petitioner in the petition for adjudication to the Arbitrator who was directed to be named by the Vice-Chancellor of the University in terms of Clause 25 of the agreement dated 5.4.1988. By the aforesaid order the Vice-Chancellor was further directed to name/appoint an Arbitrator under Clause 25 of the aforesaid agreement within 4 weeks from the date of the order. It was also directed that the Arbitrator would then enter upon the reference and that the Arbitrator would make/finalize the award within 4 months from the date of entering upon the reference.

(4) The period of 4 months under order dated 13.5.1996 admittedly expired on 12.6.1996. The petitioner filed an application in this Court on 9.8.1996 under Section 151, Civil Procedure Code read with Section 20 of the Arbitration Act. In the said application, the petitioner stated that in spite of the order passed by this Court to appoint an Arbitrator within 4 weeks, the respondents have not appointed the Arbitrator. The respondents have thus committed contempt of Court by not honouring the order dated 13.5.1996 of this Court. Besides, under the aforesaid circumstances, by this application the petitioner has sought for appointment of an independent and impartial Arbitrator of its own in the nature of a retired Judge or a reputed Engineer to adjudicate upon the disputes.

(5) Notice was issued to the respondents on the said application, on service of which the respondents appeared through their Counsel and also filed a reply to the aforesaid petition filed by the petitioner. In the reply filed by the respondents it is stated that the Vice-Chancellor of the University of Delhi under letter dated 11.6.1996 appointed Professor B.P. Srivastava, Professor of Law as the sole Arbitrator to adjudicate upon the disputes between the parties in terms of the order dated 13.5.1996. It is further stated in the said reply that Prof. Srivastava in his letter dated 12.6.1996 refused the assignment and recorded his inability to act as the sole Arbitrator as he was involved with certain other projects. Mr. Srivastava further stated that as he would be going out of Delhi he would not be able to commence the arbitration proceedings before August, 1996. Copy of the letterdatedl2.6.1996and also the letter dated 11.6.1996 have been placed on record. The respondents have further stated in the reply that in view of refusal by the Arbitrator appointed to act, the Vice-Chancellor by his letter dated 12.8.1996 filled up the vacancy caused by refusal to act by the appointed Arbitrator by appointing Prof S.S. Rathore as the sole Arbitrator to adjudicate upon the disputes arising between the parties.

(6) By the said letter Prof. Rathore was informed that he was to make/finalize the award within 4 months from the date of entering upon the reference. The respondents stated that in view of the aforesaid actions on the part of the respondents it cannot be said that the respondents did not appoint the Arbitrator within 4 weeks from the date of the order passed by this Court. It is further stated that since the Arbitrator appointed by persona designata in terms of the agreement refused to act the vacancy was filled up by the Vice-Chancellor in terms of Section 8 of the Arbitration Act and therefore, in the present case there could be no other appointment of an impartial or independent person as the Arbitrator, as sought for by the petitioner.

(7) I have heard the partner of the petitioner who appeared before me in person and also the learned Counsel appearing for the respondents.

(8) From the record produced before me it appears that in fact the persona designata in terms of Clause 25 of the agreement and in terms of the order passed by this Court on 13.5.1996 appointed Prof B.P. Srivastava as the sole Arbitrator to adjudicate upon the disputes arising between the parties. It, however, appears and admitted by Mr. Kaul, the learned Counsel appearing for the Counsel for the respondents that intimation about the said appointment of Prof .B.P.Srivastava was not given to the petitioner as it is the duty of the Arbitrator to issue notices to the parties calling upon them to submit their claims, counter-claims etc. According to the learned Counsel appearing for the respondents. Prof B.P. Srivastava having refused to act as the sole Arbitrator the vacancy caused was filled up in terms of Section 8 of the Arbitration Act within 15 days from the date of receipt of the notice as is envisaged under the aforesaid provision and, therefore, the subsequent appointment is also legal and valid being in consonance with the aforesaid provision.

(9) The petitioner appearing in person on the other hand submitted before me that since no intimation was sent to the petitioner about the appointment of an Arbitrator on 11.6.1996, it cannot be said that any appointment was made by the respondents. Even assuming that such an appointment was, in fact, made by the respondents but the said respondents ignored and/or refused to fill up the vacancy for a long time and only after service of the notice of the present application on the respondents they immediately appointed the Arbitrator on 12.8.1996 which is not in accordance with the provisions of Section 8 and, therefore, an independent and impartial Arbitrator is required to be appointed by the Court.

(10) In support of its submission the petitioner relied upon a decision of the Supreme Court in G. Ramachandra Reddy & Co. v. Chief Engineer, Madras Zone, Military Engineering Service, and the decision of this Court in M/s. International Security & Intelligence Agency Ltd. v. Municipal Corporation of Delhi & Another; 1996 (1) Arbitration Law Reporter 450=63 (1996) Dlt 83.

(11) In G. Ramachandra Roddy's case (supra) it was held by the Supreme Court that when a notice is given to the opposite 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 on the contract. It was further held in the said case that even if Section 8(a) per sc does not apply, notice was an intimation to the opposite contracting party to act upon the terms of the contract and his/its non-availment 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.

(12) In my considered opinion the aforesaid ratio laid down by the Supreme Court in not applicable in view of the fact that in the present case the respondents appointed the sole Arbitrator in terms of the order passed by this Court on 13.5.1996 within 4 weeks as granted by this Court and, therefore, it cannot be said that there was neglect by the respondents to appoint the Arbitrator. Therefore, it cannot be said that there was any forfeiture of the right of the respondents to appoint an Arbitrator in terms of the arbitration agreement. However, the question still subsists as to whether after appointment of the said Arbitrator and upon his refusal to act the vacancy should have been supplied by the respondents immediately or not. The respondents waited for about two months before supplying the vacancy and that action was also taken after service of notice of the present application on them by the petitioner. Accordingly, the question arises as to whether supplying of the vacancy by the respondents should be set aside and an impartial and independent Arbitrator is to be appointed by this Court. In respect of this issue reliance was sought to be placed by the petitioner on the decision of this Court in International Security & Intelligence Agency Ltd. (supra). In that case it has been held by this Court that if the Director (S & JJ), Municipal Corporation of Delhi has either himself not entered upon the reference or has not appointed an Arbitrator within fifteen days from the date of receipt of the notice from the petitioner he would be deemed to have abdicated his authority to nominate the Arbitrator and the Court gets jurisdiction to appoint one for deciding the disputes between the parties. It was further held that after the filing of the petition it is only the Court which would have a right to appoint an Arbitrator.

(13) The learned Counsel appearing for the respondent however, relied upon a decision of the Calcutta High Court in West Bengal Essential Commodities Supply Corporation Ltd. v. M/s. International Trading Corporation of India; . In the said decision it has been held that by virtue of the provisions of Section 8(l)(b) the Managing Director of the appellant was quite competent to supply the vacancy caused by the refusal of the first Arbitrator. It was further held that the Managing Director of the appellant has been specifically authorised by the parties to appoint the Arbitrator and that this authority of the Managing Director did not come to an end on the appointment of an Arbitrator but would also continue for the purpose of filling up the vacancy that might be caused for any of the reasons as mentioned in Section 8(l)(b) of the Arbitration Act. In that context the High Court held that the appointment of the Arbitrator for the second time by the Managing Director of the appellant was quite legal. The Court further held that simply because application under Section 20 of the Arbitration Act was pending that would not effect suspension of the arbitration agreement or of the authority of the Managing Director of the appellant to appoint an Arbitrator as conferred upon him by the parties by arbitration agreement and that he was en titled to fill up the vacancy caused by the refusal of the previously appointed Arbitrator to act.

(14) The facts of the present case appear to be almost similar to that of the case where the Calcutta High Court has rendered the aforesaid decision. The appointment of the first Arbitrator was made by the Vice Chancellor of the University, the persona designata under the arbitration agreement within the stipulated time as fixed by this Court. The said Arbitrator having refused to act in terms of his appointment it would be deemed that a vacancy had occurred in respect of the post of the sole Arbitrator. In terms of the arbitration agreement the vacancy was also required to be supplied by the persona designata under the agreement as his power to appoint the Arbitrator did not come to an end with the appointment of the first Arbitrator and in case of vacancy occurring to the said post, in my considered opinion, it was the persona designata himself who could supply and fill up the vacancy. I also of the considered view that simply because the application has been filed by the petitioner in the present case under Section 151 of the Code of Civil Procedure read with Section 8 of the Arbitration Act the same would effect suspension of the arbitration agreement or of the authority of the Vice Chancellor to appoint an Arbitrator as conferred upon him by the parties by the arbitration agreement. It is a fact that there was some delay on the part of the Vice Chancellor in appointing the Arbitrator for the refusal to act as the sole Arbitrator by Prof. B.P. Srivastava was intimated to the Vice Chancellor on 12.6.1996, the copy of which, it appears was received on 14.6.1996 and the vacancy was supplied in the month of August under letter dated 12.8.1996. However, notice for supplying and filling up the vacancy was not issued by the petitioner prior to the filing of the present application. It is appreciated that the same was not possible since the petitioner was not intimated about the appointment of the first Arbitrator by the respondents. However, the fact remains that the notice for filling up the vacancy caused by refusal to act by the first Arbitrator could be said to have been served on the respondent for the first time when the copy of the present application was served on the respondent. It appears that within 2 /3 days thereof the respondents appointed the present Arbitrator and did not wait till the expiry of the 15 days time. Therefore, the said appointment by way of filling up the vacancy caused by refusal to act by the first Arbitrator, in my opinion, is inconformity with the provisions of Section 8 of the Arbitration Act and, therefore, is required to be upheld.

(15) In the result, the appointment made by the respondent appointing Prof. S.S. Rathore as the sole Arbitrator to adjudicate upon the disputes arising between the parties in the present case is upheld. It is directed that the Arbitrator shall enter upon the reference immediately and shall make /publish his award within 4 months from the date of entering upon .the reference. The date for completion of the arbitration proceedings, accordingly, stands extended and the application filed by the respondents praying for extension of time and registered as I.A. No. 941997 also stands allowed. All other pending applications stand disposed of in terms of the order passed herein. The suit also stands disposed of accordingly. No costs. Ia 94/97 allowed.