Anita Electricals (P) Ltd. vs National Buildings Construction ...
2003 Latest Caselaw 108 Del

JUDGMENT

S. Mukerjee, J.

1. This arbitration application has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 with the prayer for this Court to appoint an Arbitrator pursuant to the refusal of respondent No.1 to fill up the vacancy caused by the resignation of Shri B.P. Gupta who was earlier the nominee of respondent No.1.

2. The only fact which needs to be mentioned at this stage is that the arbitration proceedings have been continuing before an Arbitral Tribunal which was lastly comprised of Hon'ble Mr. Justice P.K. Palli Retired Judge and Shri V.P. Gupta officer/nominee of respondent as Arbitrators and Justice A.B. Rothagi (Retired Judge) as Presiding Arbitrator.

3. Vide letter dated 2.7.2002, Shri V.P. Gupta the nominee of respondents on the Arbitral Tribunal, resigned. Thereupon in the next meeting of the Arbitral Tribunal dated 6.7.2002, the respondents were called upon to nominate another Arbitrator in place of Shri V.P. Gupta

4. The respondent No.1, vide impugned communication/order dated 31.7.2002, declined to appoint another Arbitrator on the ground that there was no arbitration agreement between the parties and therefore according to them (respondent No.1) it would be improper and illegal to appoint another Arbitrator in place of Shri V.P. Gupta.

5. In the above said communication, reliance was also placed upon a writ petition being CW 3057/2002 pending before another Bench of this Court, wherein a prayer has been made that the Arbitral Tribunal should not proceed with the arbitration/reference.

6. From the text of the order dated 29.05.2002 passed by Hon'ble Mr. Manmohan Sarin J, while dealing with the above writ petition, it is clear that the only stay granted by the writ Court, by virtue of the ad-interim order, is only in relation to the final Award and not against the further proceedings.

7. The respondents have duly taken therein all the contentions, which were forming the basis for declining to appoint/nominate an Arbitrator in place of Shri V.P. Gupta after his resignation. Since the said contentions are already receiving due consideration by the writ Court, it would be appropriate that I should not also consider the same, except to the extent that the respondents having failed to obtain a total stay of further proceedings before the Arbitral Tribunal, it is obviously not open to the respondent No.1 to try to achieve indirectly, what they have failed to do during their prayer for stay argued by them (respondent) before the writ Court.

8. Accordingly, in my view this petition can be disposed of with a direction to respondent No.1, to appoint its nominee Arbitrator in place of Shri V.P. Gupta who has resigned within a period of 15 days from the date of this judgment. In case for any reason the respondent No.1 either delays or does not appoint any nominee Arbitrator within the stipulated period, then Ms. Justice Sharda Aggarwal (Retired Judge of this Court) shall be the nominee Arbitrator in place of Shri V.P. Gupta who has resigned and whose vacancy has not been filled up by respondent No.1, despite opportunity granted for the said purpose.

9. It need to be emphasized that as per the scheme of the new Arbitration Act, 1996, it is imperative that the arbitral proceedings should be allowed to continue in a smooth manner so as to achieve expeditious completion thereof. It is also the mandate of Section 5 of the Arbitration Act, 1996 that the Courts shall not interdict or interfere with the continuance of arbitration proceedings, except in accordance with the provisions of part I of the said Act. It is clearly stipulated in Chapter III of said part I of the Act, and in particular in Section 15 thereof, that upon the mandate of an Arbitrator terminating on his resignation, a substitute Arbitrator shall be appointed according to the Rules that were applicable to the appointment of the Arbitrator being replaced.

10. Since the replaced Arbitrator himself was appointed by an earlier administrative order passed by respondent No.1 as replacement for an earlier Arbitrator Shri V.K. Anand, who was also appointed by an administrative order of respondent No.1, therefore the grant of one further and last opportunity to respondent No.1 to make the appointment within 15 days would suffice to meet the requirements of the appointment being having been to be made to the rules, which were applicable to the appointment of Arbitrator being replaced.

11. I would also like to refer to the Constitution Bench judgment of the Hon'ble Supreme Court in M/s Konkan Railway Corporation Ltd. & Anr. Vs. M/s. Rani construction Pvt. Ltd. where it has been held that this Court while dealing with an application for appointment of an Arbitrator, is not to go into adjudication of the disputed questions/aspects at all.

12. Further as held by Hon'ble Apex Court in Konkan Railway Corpn. Ltd. Vs. Mehul Construction Co., that Section 16 empowers the Arbitral Tribunal to rule on its own as well as on objections with respect to the existence or validity of the arbitration agreement. This being the legislative intent it would be proper for the Chief Justice or his nominee just to appoint an arbitrator without wasting any time or without entertaining any contentious issues at that stage, by a party objecting to the appointment of an arbitrator. It has been further held by the Apex Court in Nimet Resources Inc. and Another Vs. Essar Steel Ltd.; (2000) SCC 497 that ... "it is no doubt permissible under Section 11 of the Act to decide a question as to the existence or otherwise of the arbitration agreement" at the same time, the power that is exercised by the nominee of the Chief Justice of India under Section 11 of the Act, is in the nature of an administrative order. In such a case, unless the Chief Justice of India or his nominee can be absolutely sure that arbitration agreement does not exist between the parties, it would not be permissible to interdict the arbitration proceedings, more so where, as in the present case, there is another proceeding going on CWP No.3057/2002 where there is only a limited stay against the passing of final award. Furthermore and in any case, in terms of the judgment of the Hon'ble Apex Court in Babar Ali Vs. Union of India & Others the reported as (2002) 2 SCC 178, the challenge on such aspects, can appropriately be made only after the award. In this case the Arbitral Tribunal having already ruled by majority decision vide order dated 13.5.2002 to proceed ahead with the reference, the reiteration of the same point to decline to appoint a replacement for Shri V.P. Gupta, who has resigned, appears to be nothing else but an attempt to dispute the correctness of the majority decision.

13. In view of the above the application is allowed to the extent of a direction being issued to respondent to appoint an arbitrator to replace Shri V.P. Gupta with the further order in the event of respondent No.1 not acting in accordance with the direction, then Ms. Justice Sharda Aggarwal shall be the Arbitrator who will replace Shri V.P. Gupta, who has resigned. The petition is disposed of accordingly. No order as to costs.