Bhartiya Construction Company vs Delhi Development Authority And ...
1999 Latest Caselaw 933 Del

JUDGMENT

J.B. Goel, J.

1. This petition under Section 8 and Section 20(4) of the Arbitration Act, 1940 (for short "the Act") is for appointment of an Arbitrator by the Court.

2. Petitioner's tender for certain work out of the work of "construction of houses at Sarita Vihar, Sector 1, Pocket A Group IV" was accepted vide letter dated 18.9.1990 and Agreement No. 7/EE/SED-4/DDA/90-91 was executed between the parties. The contract is governed by the General Conditions of the Contract Clause 25 of which provides for resolving the disputes arising out of the contract by arbitration. The Chief Engineer of DDA is the Designated Authority to appoint the Arbitrator. The work was to be completed within 12 months, i.e., by 27.9.1991, but was actually completed on 7.4.1994. Due to delay various disputes arose including claims for increase in rates of labour and material. The Arbitrator was not appointed in spite of contractor's notice and he had to file a petition under Section 20 of the Act being Suit No. 1885-A/95 but in the meantime, the respondent appointed one Shri Suresh Mehta as Arbitrator. The said Arbitrator entered upon the reference but by his letter dated 12.6.1997, he resigned as Arbitrator. The petitioner again approached the respondent by means of letter dated 19.6.1997 for appointment of Arbitrator and also suggested names of some persons and desired that an independent technical hand be appointed as an Arbitrator. The notice sent on 19.6.1997 was served on 22.6.1997. Getting no response the petitioner has filed this petition on 28.7.1997 for appointment of the Arbitrator by Court taking the plea that the respondents having not appointed the Arbitrator within 15 days, they have lost their right to appoint the Arbitrator.

3. The respondents in reply have pleaded that the Arbitrator had been appointed by the Chief Engineer, DDA who is the Designated Authority by means of letter dated 22.7.1997, (i.e., before the present petition was filed on 28.7.1997) and the Arbitrator appointed is Superintending Engineer (Arbitration) so designated to deal with arbitration cases only.

4. Learned Counsel for the petitioner has contended that the Arbitrator having not been appointed within 15 days of service of notice dated 19.6.1997, the respondents have forfeited their right to do so and now the Court only could appoint the Arbitrator and the Arbitrator appointed after 15 days of service of notice has not been validly appointed, He has relied on Nandyal Co-op. Spinning Mitts Ltd. v. K.V. Mohan Rao, 1993 (1) Arbitration Law Reporter 469 (SC); G. Rama Chandra Reddy & Co. v. Chief Engineer, M.E.S. Madras Zone, 1994 (2) Arbitration Law Reporter 61 (SC); and International Security and Intelligence Agency Ltd. v. Municipal Corporation of Delhi and Ors., 1996 (1) Arbitration Law Reporter 450=63 (1996) DLT 83 (Delhi).

5. Whereas learned Counsel for the respondent has contended that only the Designated, Authority is authorised to appoint the Arbitrator according to contract between the parties. The Arbitrator has been validly appointed by him within reasonable time and before this petition was filed. The Arbitrator appointed is designated as Superintending Engineer (Arbitration) who is entrusted with such work and is a technical hand.

6. The contract in question is governed by Arbitration Clause 25 of the General Conditions of Contract. Clause 25 reads as under:

"Except where otherwise provided in the contract all questions and disputes relating to the meaning..... or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract..... shall be referred to the sole arbitration of the person appointed by the Chief Engineer of concern zone Delhi Development Authority at the time of dispute. It will be no objection to any such appointment that the Arbitrator appointed is a Delhi Development Authority employee, that he had to deal with the matters to which the contract relates and that in the course of his duties as . Delhi Development Authority employee he had expressed view on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer of concern zone Delhi Development Authority as aforesaid at the time of such transfer, vacation of office, disability to act shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of the contract that no person other than a person appointed by such Chief Engineer of concern zone Delhi Development Authority as aforesaid should act as Arbitrator and, if for any reason that is not possible, the matter is not to be referred to arbitration at all....... Subject as aforesaid the provisions of Arbitration Act ,1940 or any statutory modification or re-enactment there of and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause........"

7. This petition has been filed under Sections 8 and 20(4) of the Arbitration Act, 1940 (for short the Act) which read as under:

8. Power of Court to appoint Arbitrator or Umpire--(1) In any of the following cases -

(a)     where an arbitration agreement provides that the reference shall be to one or more Arbitrators to be appointed by consent of the parties, and all the parties do not after differences have arisen, concur in the appointment or appointments; or  
 

 (b)     if any appointed Arbitrator or Umpire neglects or refuses to act* or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or the Arbitrators, as the case may be, do not supply the vacancy; or  
 (c)     xx xx                                 xx
 

 any party may serve the other parties or the Arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
 
 

(2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an Arbitrator or Arbitrators or Umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.

20. Application to file in Court arbitration agreement--(1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.

 (2) xx                                   xx                                    xx
  (3) xx                                    xx                                    xx
 

 (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference to the Arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an Arbitrator, to an Arbitrator appointed by the Court. 
  (5) xx                                    xx                                    xx 
 

 8. In Nandyal's case, the Clauses 65.1 and 65.2 of the contract containing arbitration clause read as under:  
   

 
"65.1. Except where otherwise provided in the contract all disputes or questions relating to......shall be referred to the sole arbitration of the person

appointed by the administrative head of owner. There will be no objection to any such appointment that the Arbitrator so appointed is the owner's representative, that he had to deal with the matters to which the contract relates and that in that in the course of his duties as owner's representative he had expressed views on all or any of the matters in dispute or differences....

It is also a term of this contract that no person other than a person appointed by such administrative head as aforesaid should act as Arbitrator and if for any reason it is not possible the matter is not referred to the arbitration at all....

Clause 65.2. Subject to as aforesaid the provisions of the Arbitration Act, 1940 (for short 'the Act' added) or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause."

9. After the disputes had arisen, the respondent by his letter dated July 27, 1987 requested the administrative head of the appellant to appoint an Arbitrator within 15 days from the date of its receipt. His renewed request in letter on August 17, 1987 evoked no response and on July 7, 1988, filed the petition in the Court of the Subordinate Judge at Nandyal to appoint an Arbitrator. The notice was issued to the appellant therein. By letter dated July 27, 1988, the respondent was informed of the

appointment of one Shri Yethiraj, Superintending Engineer of BHEL, Hyderabad as sole Arbitrator. The learned Subordinate Judge, instead appointed Sri Justice C. Sriramulu, a retired Judge of the Madras High Court as Arbitrator. The High Court dismissed the revision petition. The Supreme Court upholding the appointment held that:

"It would thus be clear that if no Arbitrator had been appointed in terms of the contract within 15 days from the date of the receipt of the notice, the administrative head of the appellant had abdicated himself to the power to appoint Arbitrator under the contract. The Court gets jurisdiction to appoint an Arbitrator in place of the contract by operation of Section 8(l)(a). The contention of Sri Rao, therefore, that since the agreement postulated preference to Arbitrator appointed by the administrative head of the appellant and if he neglects to appoint, the only remedy open to the contractor was to have recourse to civil suit is without force. It is seen that under the contract the respondent contracted out from adjudication of his claim by a Civil Court. Had the contract provided for appointment of a named Arbitrator and the named person was not appointed, certainly the only remedy left to the contracting party was the right to suit. This is not the case on hand. The contract did not expressly provide for the appointment of a named Arbitrator, instead power has been given to the administrative head of the appellant to appoint sole Arbitrator. When he failed to do so within the stipulated period of 15 days enjoined under Section 8(1)(a), then the respondent has been given right under Clause 65.2 to avail the remedy under Section 8(1)(a) and request the Court to appoint an Arbitrator. If the contention of Sri Rao is given acceptance, it amounts to put a premium on inaction depriving the contractor of the remedy of arbitration frustrating the contract itself."

The Arbitrator in this case was not appointed by the Designated Authority for over one year of service of notice and was appointed after petition for appointment by Arbitrator was filed.

10. This was followed in G. Rama Chandra Reddy (supra) and after referring to the aforesaid paragraph 10 from Nandyal's case, it was observed as under:

"Thus when the 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 when no .agreement was reached, even in the Court between the parties, the Court gets jurisdiction and power to appoint an Arbitrator. Even if Section 8(a) per se, does not apply, notice was an intimation to the opposite contracting party to act upon the terms of the contract and his/its non-a ailment 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. 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. The learned Single Judge rightly

exercised the power under Section 20(4) of the Act and appointed the Arbitrator. The Division Bench, therefore, was not right in holding that the respondent has by giving option to the appellant to agree for appointment of an Arbitrator out of the five named persons had left it and the appellant to appoint an Arbitrator and allowing appellant to appoint an Arbitrator. On the other hand, the appointment of an Arbitrator made by the learned Single Judge must be deemed to have been approved by us.

The appeal was allowed. In this case also Arbitrator was not appointed even after receipt of notice for over 7 months and till the petition was filed.

11. In Union of India v. Prafulla Kumar, , the arbitration clause provided that the dispute arising out of the contract shall be referred to the sole arbitration of the person appointed by the President of India with such designation only as may be specified in Manipur territory and if he is unwilling to act to the sole arbitration of some other person appointed by the Arbitrator. Dispute arose but no Arbitrator was appointed and the respondents filed a suit under Section 20(4) of the Act in the High Court of Calcutta praying for an order of reference under the terms of agreement. The Court appointed one Mr. Tapash Banerjee, as the Arbitrator. Letters Patent Appeal was dismissed. In further appeal, the Supreme Court held that if an Arbitrator had not been appointed the Court may proceed to appoint an Arbitrator but in so doing it is desirable that the Court should consider the feasibility of appointing an Arbitrator according to the terms of the contract.

12. Hie law is thus clear that the Arbitrator should be appointed with the consent of the parties if they had so agreed. And it is desirable that the Court should consider the feasibility of appointing the Arbitrator according to terms of the contract. In the present case, as per terms of the contract, the Arbitrator was to be appointed by the Chief Engineer, DDA who actually appointed one Shri Suresh Mehta but he resigned on 12.6.1997. Another Arbitrator could be appointed by the same authority i.e. the Chief Engineer, DDA. Notice requiring the respondents to appoint such an Arbitrator was sent on 19.6.1997, and received by the respondent on 22.6.1997 and the Arbitrator was actually appointed by the Chief Engineer, DDA vide his letter dated 22.7.1997 i.e. within 30 days. The present petition was filed on 28.7.1997. This means that the Arbitrator was appointed by the Designated Authority before this petition was filed. The Arbitrator appointed is the Superintending Engineer (Arbitration), specifically entrusted with the work of Arbitrator. It is not the case of the petitioner that he is not an independent person and no bias is alleged against him. The delay in appointing the substituted Arbitrator is not so inordinate which may give rise to the inference that the Designated Authority had shown disinclination and thereby abdicated its power to appoint the Arbitrator. This delay has not rendered the agreement non est. The Arbitrator has been appointed according to the terms of the agreement. The petitioner has desired that a technical hand should be the Arbitrator. The Arbitrator appointed fulfillls this requirement. There seems to be no valid ground for revoking the authority of this appointed Arbitrator and to appoint another Arbitrator. In any case this very Arbitrator could as well also be appointed by this Court. The Superintending Engineer (Arbitration)

appointed by the Chief Engineer, DDA vide his letter dated 22.7.1997 has thus been validly appointed and no other Arbitrator needs to be appointed.

This petition is accordingly dismissed.