Enkay Construction Company vs Delhi Development Authority And ...
2002 Latest Caselaw 40 Del

JUDGMENT

B.N. Chaturvedi, J.

1. The Delhi Development Authority, respondent No. 1, awarded a contract for construction of 136/188 CSP Houses at Paschim Vihar, Pocket, GH-6, Near Nangloi Sayed Village, to the petitioner, M/s. Enkay Construction Company. A formal contract bearing No. 21/EE/WD-6/89-90/DDA dated 30.9.1989 was executed. The construction of houses could not be completed within the stipulated time frame. The petitioner attributed the delay in completion of construction work to acts of commission/omission on the part of respondent No. 1. On completion of work, the petitioner sought release of outstanding dues. The respondent No. 1, however, failed to pay the same. Thus, disputes and differences arose between the parties.

2. By way of a letter dated 23.1.1995, the petitioner requested the Engineer Member of respondent No. 1 to refer the disputes/differences to arbitration in terms of Arbitration Clause 25 of the General Conditions of Contract. The Engineer Member, however, according to the petitioner, 'refused and deliberately neglected' to refer the disputes to arbitration and, thus, abdicated his power to appoint an arbitrator. The petitioner, accordingly, approached this Court by way of a petition under Section 20 read with Section 8 of the Arbitration Act, 1940 for appointment of an arbitrator.

3. Opposing the petition for appointment of an arbitrator, the respondent No. 1 asserted that the stipulated date of completion of work was 29th of September, 1990, but the petitioner could accomplish the same on 20th of January, 1997 only. It is claimed that the payment for the entire work done was made to the petitioner up to the final bill in accordance with the terms of the contract, and the petitioner accepted all payments in full and final settlement without any protest. According to the respondent No. 1, no disputes/difference actually existed, and there was, thus, no occasion for a reference to arbitration. It is added that the respondent No. 1, by its letter dated 23.3.1995, informed the petitioner that since its request for arbitration had been received in its office on 23rd of January, 1995, after expiry of the time prescribed under Clause 25 of the agreement, being barred, its claims were deemed to have been waived.

4. The petition was eventually decided by this Court by an order dated 14.12.2000 and Justice J.B. Goel, a retired Judge of this Court, was appointed as sole arbitrator to adjudicate upon the disputes raised by the petitioner. Justice (Retd.) J.B. Goel, however, by his letter dated 5.1.2001, expressed his inability to enter upon the reference. A verbatim reproduction of his letter reads as under:-

From:

Justice J.B. Goel (Retd.)

AB-23, Tilak Marg,

New Delhi.

To,

The Registrar,

Delhi High Court,

New Delhi.

Sub: Re-appointment of Arbitrator in suit No. 106 A/98.

.....

Sir,

Please refer to your office letter No. 287/11/1 dated 19.12.2000.

2. From this letter, it is seen that I have been appointed as an Arbitrator vide order dated 14.12.2000 passed by Hon'ble Mr. Justice Madan B. Lokur, High Court of Delhi in suit No. 106 A/98 - M/s. Enkay Construction Co. v. DDA and Anr.

3. In this connection I have to inform you that I have since taken over as Chairman, Appellate Authority for Industrial and Financial Reconstruction (AAIFR) with effect from 13.12.2000. In view of my appointment as Chairman, AAIFR, I cannot take up new arbitration cases. As such, a new arbitrator will have to be appointed in this case by the High Court.

4. Letter No. 287/11/1 dated 19.12.2000 along with its enclosures (in original) are returned herewith.

 

Yours faithfully 

 

sd/

 5.1.2001        (J.B. GOEL)"

 

5. Consequently, the petitioner came up with the instant IA. No. 5007/01 under Section 151 CPC seeking appointment of another arbitrator in place of Justice (Retd.) J.B. Goel, which faces opposition from respondent No. 1 on the ground that in view of the refusal on the part of Justice (Retd.) J.B. Goel, the arbitrating clause would have to be resorted to, and in the given situation, the Engineer Member of respondent No. 1, being persona designata, would have to appoint the substitute arbitrator in place of Justice (Retd.) J.B. Goel.

6. I have heard arguments on both the sides.

7. In the present case, the appointment of Justice (Retd.) J.B. Goel as sole arbitrator was made by this Court on a petition under Section 20 read with Section 8 of the Arbitrator Act, 1940. The petitioner sought invocation of the arbitration clause by way of a letter dated 23.1.1995. On failure of Engineer Member of respondent No. 1 to refer the disputes to arbitration, the said petition was filed before this Court, which culminated on 14th of December, 2000 into appointment of Justice (Retd.) J.B. Goel as sole arbitrator. It would, thus, be noticed that at the time when invocation of the arbitration clause was sought, the Arbitration Act, 1940 (for short 'Old Act') held the field, but after filing of the petition for appointment of an arbitrator, the Arbitration and Conciliation Act, 1996 (for short 'New Act') had come into force with effect from 22nd of August, 1996.

8. In terms of Section 21 of the New Act, "unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which request for that dispute to be referred to arbitration is received by the respondent". The Old Act stood repealed by virtue of Section 85 of the New Act, but notwithstanding such repeal, the provisions thereof apply in relation to arbitral proceedings which commenced before the New Act came into force, unless otherwise agreed by the parties. Unlike Section 21 of the New Act, there is no provision under the Old Act indicating the point of time since when the arbitral proceedings there under are deemed to commence. Section 48 of the Old Act saved only pending reference at the commencement of that Act, in respect of which the law in force immediately before the commencement thereof was to apply. In terms of Section 2(e) of the Old Act 'reference' meant a reference to arbitration implying thereby that anything done before making of a reference, including request for reference to arbitration by either party, was kept outside the purview of Section 48 of that Act.

9. Learned counsel for the petitioner, referring to an Apex Court decision in " Thyssen Stahalunion GMBH v. Steel Authority of India Limited", , argued that since, in the present case the petition under Section 20 of the Arbitration Act, 1940 was filed on 9th of January, 1990 and the appointment of arbitrator was made on 14th of December, 2000 after coming into force of the New Act with effect from 22nd of August, 1996, appointment of a new arbitrator in place of Justice (Retd.) J.B. Goel is liable to be made by this Court only in view of Section 15(2) of the New Act.

10. Learned counsel for the respondents, however, contested the said plea on the ground that in view of refusal or inability to act being expressed by Justice (Retd.) J.B. Goel, the arbitration clause has to be resorted to, to supply the vacancy by the Engineer Member of respondent No. 1, and it is only on his failure to make an appointment within 15 clear days after service of a notice in that respect that the petitioner could apply to the Court under Section 8(2) of the of the Old Act for appointment of another arbitrator in place of Justice (Retd.) J.B. Goel.

11. In view of rival contentions of the parties' counsel, as aforesaid, it is of vital importance to find if for appointment of another arbitrator in place of Justice (Retd.) J.B. Goel the provisions of the Old or New Act would apply.

12. In Thyssen case (supra), though there is no direct finding regarding point of time when the arbitration proceedings are deemed to commence under the Old Act, two opening sentences in para 4 of the judgment, extracted hereunder, are significant to note:

"4. Disputes and differences having arisen, the arbitration proceedings commenced on September 14, 1995 under the old Act. On this date request for arbitration was made to the ICC under the arbitration clause in the contract....."

Clearly, even under the Old Act, the date of request for arbitration was taken to be the date of commencement of arbitration proceedings. The date of commencement of arbitral proceedings is of vital importance in determining if the provisions of Old or New Act would apply in relation to a particular case. In para 22 of the judgment in Thyssen case, it was laid down:

"22. For the reasons to follow, we hold:

1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996).

2. xxxxx xxxxx xxxxx

3. xxxxx xxxxx xxxxx

4. The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force."

Thus, taking the date of request for arbitration to reckon the date of commencement of arbitral proceedings, in the present case, since the request for arbitration was made to the respondent No. 1 by the petitioner on 23rd of January, 1995 before the New Act had come into force, it is the provisions of Old Act which would apply while considering the case for appointment of another arbitrator in place of the one, who has expressed his inability to act in that capacity.

13. The appointment of Justice (Retd.) J.B. Goel as sole arbitrator was made by this Court in exercise of powers under Section 20(4) of the Old Act. Sub-section (5) of Section 20 of the Old Act provides that after appointment of an arbitrator by the Court under Sub-section 4, the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of the Old Act so far as they can be made applicable. If a vacancy is caused in view of any appointed arbitrator or umpire refusing to act or being incapable to act, as in the present case, and the parties or the arbitrators, as the case may be, do not supply the vacancy, any party may serve the other party or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy and if the appointment is not made within 15 clear days after service of such 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 umpires, as the case may be. For the benefit of reference, Section 8 of the Old Act is reproduced hereunder:-

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) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;

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 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."

14. In the given case, admittedly, before making instant application for appointment of another arbitrator in place of Justice (Retd.) J.B. Goel, the petitioner did not serve the respondent No. 1 with any notice, as contemplated under Section 8(1) of the Old Act, before making the present application. An application for appointment of another arbitrator can be made before the Court under Section 8(2) of the Old Act only on failure of Engineer Member of respondent No. 1 to make appointment of another arbitrator within 15 days of the service of a notice in that respect by the petitioner. The learned counsel for the respondent is, thus, justified in resisting the application seeking appointment of another arbitrator in place of Justice (Retd.) J.B. Goel without serving a notice on Engineer Member (persona designata) of respondent No. 1 for appointment of another arbitrator within 15 days of service thereof in terms of arbitration clause.

15. In the result, the application is dismissed.